COVID-19 AND PROPERTY
A summary of opinions from myself and other property industry experts, specifically including Ben Kingsley (chair of the Property investment council of Australia and Bryce Holdaway, presenter in TV’s location location location take on the market in their podcast, a summary of their points which I agree with is below.
- Anxiety, fear and stress are being proliferated by naysayers, doomsayers, media and ignorant individuals. Those who allow these emotions of others to waiver their resolve will fall prey to the notions of reactive individuals who are no longer able to think clearly. Resulting in a self-fulfilling prophecy.
- Negativity and stress is a pandemic in itself and social attitudes are a contagion. We all have uncertainty; however, it is how we react that makes all the difference.
- Yes, people in the following industries are affected; casual workers, entertainment, travel, hospitality, health, retail, tourism, events, sport and many small sole traders, and now may not be the right time for you.
- 60% of Australians will be unaffected financially.
- Facts mitigate noise. Be more assertive, take a breath and recognize that the media are a business within themselves and it pays well when they have a following. It is in their best interests to exacerbate reports on the smallest sample size and minority fighting over toilet paper, and the common person gobbles it up and thrives in the drama. It is not a systemic problem.
- Australia is the world’s 14th largest economy, with only a population of 25 million. An impressive position as an economic power in the global economy.
- Bernard Salt has also stated “Australia has and will continue to see huge immigration.”
- The future looks amazing. Let’s look past what is effectively just a moment in time that will pass, just as many before it. Currently impacting on our face to face dealings and limiting physical mobility. Relying on face to face contact and mobility, is a limiting thought within a global society and network. Use this time to plan and transcend limiting beliefs while reflecting on what is important in life; family, friends, being kind to others, tolerance and acceptance of others. Mobility, income and job security are challenges that ought not to be underestimated of course but it can also be an opportunity to grow, adapt and thrive.
- There will be vaccines to treat this, as there is for HIV and Hepatitis. It will not necessarily cure COVID-19 but it will allow people to live a long life I believe. Yes, I believe this in the absence of definitive proof, but if we can survive Ebola we can survive COVID-19. You have a choice to be a pessimist, negative, downtrodden or a victim it is your choice. But you also have a choice to have hope and a belief in humanity.
- Construction has slowed and we need 180,000 new dwellings a year. This year only circa 140,000 new dwellings will be built.
- For the first time in living memory, interest rates are aligned with property rental yields, this is unprecedented and incredibly favourable heading out of this pandemic.
- This is a short-term disruption, a temporary challenge, and processes are in place or coming into place to assist us in hibernating through this.
- If shares lose 50% in value, what has the investor lost? NOTHING, if they do not sell!
- PROPERTY UNDERPINS THE ECONOMY; the Government won’t let it fail.
- There is support on offer, aligned with the stimulus package of the Government:
- Repayment holiday for mortgages on investment property and principle place of residence
- Tenancy eviction moratorium for 6 months
- Volatility in shares makes property more of a safe haven.
- Buyer activity is still alive and well.
- People are still competing to purchase property.
- Some sellers are not going to put their property on the market, but many are still selling and are adapting with virtual open houses.
- Buyers are seeing more opportunities and can see the bigger picture.
- The market is not as tamed as people would love to have you believe.
- My clients are well educated by me, aspirational, they have buffers in place and are prepared.
- Some property headlines are fake news compared to the reality of the property market and buying property, there has been no substantial change that has materialized.
- Sense of unease about future price and rental can be offset by being pragmatic.
- Strong fundamentals in the long term override the concern in the short term, which is a strong sentiment with smart and educated investors and investors that are smart enough to seek advice.
- Whilst there is slowing of activity to some degree, smart sales agents are gravitating to buyers’ agents’ insights.
- Speculators are negative.
- Let’s not forget that the loan to value ratio across all properties in Australia is an average of 25%, and thus not a vulnerable asset.
- There are positive things:
- Stimulus packages.
- Rate cuts.
- Vacancy rates are dropping.
- The question should not be ‘when should I buy’ it should be ‘where’.
- Uncertainty equals opportunity.
- Demand for property will spike, of course some people will need to wait, some that don’t need to wait will wait, because they are part of the herd and will end up in a feeding frenzy when the curve of the virus flattens.
- Of course, no one can ever predict the bottom of the market, let’s remember it’s a long-term asset. If there is a bottom, it will be while the panic ensues over the pandemic, perpetuated by the media.
- Fundamentals remain the same. A property purchaser must have:
- Job security.
- Good surplus income.
- Equity in their house/savings.
- I model this to ensure my clients are prepared, modelling 5% vacancy, less or no depreciation, higher interest rates and allowance for maintenance of 1%.
- The obvious industries that will be ok:
- Science, Medical, Technology, transport, construction, engineering, professional services, essential services, government paid sectors like teachers.
This virus will not impact on someone’s journey of financial transformation through property who meets the above fundamentals and overcomes their own fear. This may be the shot in the arm humanity needed to appreciate what is important, to be more tolerant, to appreciate those that are important to them, spending time with family, and being more prepared in life for challenges and unexpected events by budgeting, understanding their fixed/necessary costs and variable, elective costs, and having a plan.
Check out this link from RP DATA (CORE LOGIC)