The coronavirus pandemic will impact every aspect of our lives and threaten the long-term health of the Australian economy.
‘The full impact of COVID-19 on the Australian economy remains to be seen, but we can expect a sharp recession,’ says Emma Grey, Deloitte Access Economics’ Manager of Macroeconomic Policy and Forecasting. Unemployment is expected to reach its highest figure in three decades – the Treasury has forecast the jobless rate will rise from 5.1% to 10% in the June quarter.
But with concerns of an extended lockdown easing slightly and the Federal Government spending billions of dollars to support businesses and families, what impact can those looking to invest in property expect to see in the property market?
Some have predicted that Australian property prices will fall in the short term: AMP Capital chief economist Dr Shane Oliver expected to see a 20% drop in the Melbourne and Sydney markets.
However, it’s now not clear if such extreme predictions will hold firm, with Australian residential prices remaining in positive territory through April on the back of fewer overall sales, according to research firm CoreLogic.
"The fact that this is a temporary, enforced downturn means that vendors might be holding onto a relatively high expectation of their property value, with a view to sell once the economy returns to full-scale production," CoreLogic analyst Eliza Owen said in a research note.
In such a subdued environment, savvy investors may actually gain a benefit by getting into the market when there is less competition for properties and before prices start rising again. They would also have been encouraged by the Reserve Bank cutting interest rates in March to an all-time low of 0.25%.
Melbourne property advisor Richard Wakelin writes in his blog that some people will see the current market as an opportunity to buy properties for lower prices than they would have expected pre-pandemic.
‘The right time to buy is when it suits your personal circumstances,’ says Chris Perry, Defence Housing Australia’s Director of Sales. ‘If you have the capacity, funding and desire to buy property, there’s no reason to hold off.’
Perry, however, cautions investors to remember that property is a long-term proposition.
‘Even if the market falls over the next 12 months, history shows it’s likely to rebound,’ he says. ‘Considering you shouldn’t go into a property investment with less than a seven-to-10-year holding strategy, there will still be plenty of time for capital growth.’
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