In this week’s episode we turned our thoughts to the property market and the multitude of forces that determine its trajectory. We look at the positives that are driving values up and the potential challenges that we face on the road to recovery. This week has seen many state governments announce an easing of restrictions and a plan for kids to get back to school, with many parents working from home letting out a sigh of relief.
In this episode David Johnston, Cate Bakos and Peter Koulizos take you through:
- The seller’s market, how supply and low interest rates are underpinning property values.
- A look on the bright side as auction clearance rates are improving and key economists are reeling in their initial catastrophic predictions.
- The potential challenges to navigate as lenders update their policies, having an impact on access to finance and the Government is yet to determine what support will be available after their 6 month initiatives come to an end.
- The forecast for unemployment, a look back in time at 1991 when unemployment reached above 10% and how the property market fared.
- An update on restrictions as state governments begin the process of easing, with kids returning to school and social gatherings back on the agenda.
- And of course, our ‘gold nuggets’!
We wish you and your families the best of health and say a big thank you to all our health workers during this time.
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Covid-19 resources
- Is Australia flattening the coronavirus curve? Look at the charts …
- Scott Morrison says the coronavirus curve is flattening. Are we turning the corner?
- No breach for lenders as homeowners switch to interest-only
- Insights from one of the PM’s key economic advisers including turning point predictions!
- The landlord’s guide to surviving the pandemic
- Buying and selling property during coronavirus
- PM’s plea falls on deaf ears in dog-eat-dog commercial property world
- Airbnb declared illegal in NSW
- Property Planning Australia is here to support you as we have since 2004 | Property market update
- Peak Virus: Forecasting the Peak in COVID-19 Infections in the US and Australia
- Covid-19 – Relief from loan repayments
- Covid-19 and the Property Market
- How Will The Covid-19 Virus Impact Property In AUS?
- How is COVID19 impacting property?
- Coronavirus impacts on the Canberra property market
- Safe as houses – Covid-19
- Treasury – Economic Response to the Coronavirus
- Treasury – Supporting Individuals and Households
- ATO – COVID-19 – early release of superannuation
- ATO – COVID-19 – temporarily reducing superannuation minimum payment amounts
- ATO – Boosting cash flow for employers
Resources:
- Why your approach and assessment of risk is paramount to property success! (Ep.10)
- How mortgage strategy shapes your ability to hold property, and grow your wealth for decades into the future! (Ep.24)
- No mortgage strategy – #4 of the top 7 Critical Mistakes (Ep.34)
- Money Management – 7 steps to success (Ep.30)
- Mortgage Strategy 101 – Ep 5. Risk Management
- Four critical mortgage offset strategies!
- Mortgage Strategy 101 – Ep 6. Offset Optimisation
- Why short-term investing has long-term consequences
- Hold Or Fold: Why Smart Home Owners Should Keep A Cool Head When The Property Market Starts To Dip
- When to hold and when to fold (Ep. 18)
- How our mortgage strategy helps us to hold properties
- Mortgage Strategy 101 – Ep 3. Holding Property
- Why your Mortgage Strategy is more important than your interest rate! (Ep. 9 )
- Choosing whether to hold or sell investment property
- How to succeed with Property and Create your Ideal Lifestyle
- Mortgage Strategy 101 – YouTube video series.
Show notes
- Relaxing restrictions:
- South Australia:
- Restaurants – only outdoor dining, only 10 people have to be 1.5 m apart
- Uni/Tafe – classes of up to 10
- Parks, playgrounds, skateparks open
- Wedding – 10 people
- Funerals – 20 indoors, 30 outdoors
- Victoria:
- Auctions and opens – 10 people plus those running the auction
- School – Preps, 1, 11, 12 back on May 26 – everyone else back on June 9.
- Playgrounds and skate parks remain closed
- Gatherings – up to 5 people in your home
- Hiking, fishing and golf – up to 10 people
- Wedding – 10 people
- Funerals – 20 indoors, 30 outdoors
- Cafes and Restaurants – open for takeaway only
- South Australia:
- Workplace productivity: anecdotally we are seeing a drop in productivity. Intent and attitude of staff is 100%, but productivity for those with little kids is hard. Once kids are back at school, this could have a great impact on productivity.
- High risk phase – when the lockdown began we were at a high risk stage, now that we are reducing restrictions, the risks have increased.
- Looking at the positives for property:
- Really low interest rates – we’ve never had interest rates this low, they will change the property landscape. Interest repayments are normally the largest expense of an investment property, so now with interest rates so low, we have less properties that are negatively geared. It’s taken 15 years for property to double, and this will probably continue into the future.
- We’re in a sellers market – supply is so low at this time and this will keep property prices up. There will be a lot less property transactions, but at least the value of property will remain the same. In general, we’re seeing a reluctance on the part of home owners to sell, vendors are looking out the window and saying why would I sell during this time? The message to vendors that right now is not terrible time to sell is not getting through. On top of that, we have lower building starts and less construction on the go. Properties on market is down by 63% – April 2020 compared with April 2019.
- Auction clearances increased week on week the last three weeks – but this is not quite accurate at the moment. Counting the auctions numbers has become blurry because of current state of play (more blurry than it normally is).
- Key economists are acknowledging that the worst of the pandemic is potentially behind us. The darker scenario of a drop by 30% is looking less likely. There are still risks of a second wave.
- Potential negatives for the property market:
- Access to finance and interest rates normally have a large impact on the property market. We’ve seen some tweaks to lender policy that could rollback access, eg: if you work in retail your income will be further scrutinised, or a smaller portion of rent taken because of the risks that your tenants can’t pay. However, because supply is so low, we don’t need a huge number of buyers to maintain property values.
- Supply – once jobkeeper and 6 month repayment holidays run out and nothing replaces that, and if unemployment continues to be high – some people will have to sell their property. If there is a flood of property on the market, property prices could drop. If banks come to the party, there will not be blood in the streets.
- In 1991 unemployment got above 10% and rates were extremely high and property values remained pretty stable, this gives some perspective to the property outlook.
- RBA modelling if interest rates drop by 100 basis points, values will increase by 28%
- RBA modelling that unemployment will be down to 6-7% next year.
David Johnston – The Property Planner’s Golden nugget: If you’ve enjoyed this episode, a lot of it is talking about market cycles, and if you’d like to find out more, listen to episode 12 on “Property Cycle Management – why now is always the best time to buy if it suits your personal economy and you have a long-term property plan” and episode 19 on “Time in the market v Timing the market”. This too shall pass.
Peter Koulizos– The Property Professor’s Golden nugget: stay calm, there are a lot of people who want to say sky is going to fall, look at your research of what has happened in Australia and overseas in other crises, the sky is not going to fall. Just stay calm.
