Buyers must do their homework before launching into the spring property market when stage four coronavirus restrictions ease, experts say.
What is the impact of the coronavirus on the property market?
While the property market has fared well during past economic shocks, there is no clear-cut evidence of how it will perform during a pandemic. What is evident now is that property transactions have dropped.
Sightstone reminds you that this is a short-term event and that even if house prices fall, it will bounce back soon. This is likely due to the fall in the share market, many people not receiving bonuses, or having their business affected by lockdowns. In most cases, a downturn tends to affect higher-priced properties more than lower-priced properties.
- Expensive and higher-end markets will be the worst hit.
- Prices might suffer in cheaper, blue-collar suburbs where employees cannot perform jobs remotely or there are chances of unemployment.
- Regional markets that do not depend on tourism and hospitality might not suffer as much.
- Well-located homes in middle-ring suburbs might hold their values.
Will house prices drop due to coronavirus?
It is highly likely that house prices will drop due to COVID-19. While the housing market was gaining momentum due to interest rate cuts and easing of credit conditions, the pandemic has changed the scenario.
Consumer confidence and job security are major purchasing decisions when choosing to buy a home. Buyers might delay purchasing property due to the financial hardships they’ll face due to coronavirus like job loss, reduced hours, no bonus income, etc. This could induce household debt, so there could be a fall in demand over the coming months.
Furthermore, the ban on in-person inspections and auctions will create a short term hit on property prices. Even with the emergency rate cuts and quantitative easing, house prices will not remain at their current values.
Experts are indicating that house prices will fall due to:
- The uncertainty of borrowers as they don’t want to take out a home loan if they are not confident in making repayments. Their job and income might be in jeopardy due to the coronavirus.
- Due to social distancing measures, there are fewer auctions and inspections, and property transactions have reduced. While prospective buyers and sellers are shifting online, the number of people viewing properties have reduced.
- Auction clearance rates are in decline, meaning more homes remain unsold.
- Recession is a big threat as there could be two negative quarters of GDP growth and there could be a rise in unemployment.
While the housing market has performed relatively better than the share market against negative economic shocks, the economic slowdown created by the coronavirus must be considered.
Should I buy a house even during the coronavirus pandemic?
The low interest rate environment will not last for a long time, and property prices will bounce back once the economy gains momentum. Low-interest rates mean lower home loan repayments, however, since banks are tightening their lending policies, it might be harder for you to secure a home loan.
If your job and income are stable and not in danger of being cut, then you might have a higher chance of home loan approval. It’s best to get pre-approved now as there will be a cascade of effects that the coronavirus will have on the economy and lenders. Furthermore, you must be able to make repayments on your home loan and also the costs involved in purchasing a property.
Choosing the right agent
The slow market is putting pressure on agents. They work on commission, so the fewer homes they sell, the less money they have in their pockets. So, if you are selling in this situation, you can expect fierce competition from agents to get your listing.
As Melbourne’s leading real estate development company, Sightstone has been striving to offer property investment opportunities. Our dedicated team in development management meant our projects are in great quality for future investment performance. Our partnered architects and builders share Sightstone’s aspiration to develop projects that also benefit the nearby suburb to achieve mutual growth for the good of the community.
From the moment of occupancy, the quality of the Sightstone development and the nearby configuration has provided sound support to attract tenants and reduce the carrying costs when investing in real estate. If you require any advice on property investment, we are here to help.