{"id":25648,"date":"2020-06-07T13:42:29","date_gmt":"2020-06-07T01:42:29","guid":{"rendered":"https:\/\/propertynoise.co.nz\/au\/?p=25648"},"modified":"2020-06-07T13:52:25","modified_gmt":"2020-06-07T01:52:25","slug":"why-australian-property-wont-have-a-covid-crash","status":"publish","type":"post","link":"https:\/\/propertynoise.co.nz\/au\/why-australian-property-wont-have-a-covid-crash\/","title":{"rendered":"Why Australian property won’t have a COVID crash"},"content":{"rendered":"

PHOTO: Forecasts of big falls in median home values are likely overblown, according to Steve Douglas<\/strong><\/p>\n

REPUBLISHED WITH PERMISSION: API MAGAZINE<\/a><\/strong><\/p>\n

There has been much speculation and media attention around the potential impact of COVID-19 on the Australian property market<\/a>, with some \u201cexperts\u201d predicting house price falls of up to 30 per cent.\u00a0 But we simply don\u2019t subscribe to those theories for a number of reasons.<\/p>\n

There is no doubt there will be a level of confusion and uncertainty in the Australian property market in the short term, especially as the usual strong migration numbers stop while the borders are closed, however there are some key fundamental reasons we can expect a level of stability, which include:<\/p>\n

Low Interest Rates<\/strong><\/p>\n

The Reserve Bank of Australia was quick to reduce rates to a record low official rate of just 0.25 per cent.\u00a0 This has meant that home loans and property investment loans are now available in the community from the mid 2 per cent to 4 per cent levels, making it more affordable than ever to be a property owner and ensuring that the great majority of owners are not under duress.<\/p>\n

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Very noice! Kath & Kim star Jane Turner puts her five-bedroom Melbourne mansion on the market for a record-breaking $8million<\/a><\/h4>\n

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Ability to defer loan repayments<\/strong><\/p>\n

The Government has provided the Australian banking industry $90 billion of additional funding specifically to be used to assist with cash flow issues around loan deferrals for those impacted by COVID-19 with lost or lower earnings, including landlords that may not be receiving their property rental.<\/p>\n

They are able to defer any repayments for up to 6 months, meaning they will not be under immediate financial pressure that may have otherwise forced a ‘fire sale’ on their property.<\/p>\n

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Unwillingness to sell at discount rather than hold<\/strong><\/p>\n

There will no doubt be buyers offering substantial discounts as they seek to be opportunistic in the COVID-19 affected market.\u00a0 The key for the Australian market will be a reluctance of sellers willing to accept low ball offers for their property.<\/p>\n

This will largely be due to the lower interest rates which means they may as well continue to pay a holding cost of say 4 per cent per annum interest, rather than accept an offer with a perceived 10 per cent discount to the pre- COVID-19 market price.\u00a0 This is further enhanced by the 6 month loan deferral, which protects those that may have even lost their jobs.<\/p>\n

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Pent-up demand<\/strong><\/p>\n

Property markets in Australia always struggle to cope with the new demand from population growth and competition for premium areas.\u00a0 This remains today, albeit that it will be subdued by low or no incoming migration in the short term, and don\u2019t be surprised to see many buyers that have been procrastinating and deferring for some time become more active as they are indeed encouraged by lower interest rates.<\/p>\n

It is true that there is a split in the Australian property market with less desirable property tending to underperform in recent times against more genuine living property, so the key is to understand that you won\u2019t be able to generalise when it comes to Australian property and you need to clearly understand the difference between good and bad property.<\/p>\n

Good simply means that the property is liveable. The level of liveability will depend on budget and location, but it needs to satisfy the intended occupant with reasonable space, storage and convenience.\u00a0 I have said for many years \u201cDon\u2019t buy something you wouldn\u2019t live in\u201d and this is a great guide point when seeking to decide on a property for investment or personal residence.<\/p>\n

You should always remember that the owner occupier market is approximately two thirds of the market, so it makes sense to have a property that appeals to both investors and owner occupiers if you want to have the most competition when selling in order to lift the price as high as possible.<\/p>\n

Australian property markets are very diverse, uniquely different and offer different styles and living options able to satisfy discerning buyers and renters, so I am sure you can find one that suits your preferences and budgets, and then enjoy relative stability that has been shown over many decades in the market.<\/p>\n

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