It has now been seven months since our March blog addressing the likely impact of COVID-19 on the Property market (click to read)
So its time we took a look at what has happened and what may follow.
1 THE STOCK MARKET.
The stock market fall was short and sharp but the All Ords is now back to around the pre-Covid-19 level. As expected, this market has had little if any impact on the property market.
2. WHAT EFFECT COULD THE CORONUVIRUS HAVE ON THE PROPERTY MARKET?
We did predict that if Government quarantine restrictions were imposed, this would have a major impact on transactions. We have certainly seen this with sale volumes down by about 80% up until the end of September.
Fortunately, now that open for inspections can be held, the property market has opened up again.
I think the Melbourne property market is currently in a bit of a ‘Twilight Zone’ where the built-up supply and demand for residential property over the past seven months is being met with stable prices. I expect this situation to continue for the short term (up to six months), however this may not be the case in the medium term.
We have yet to see the impact of a recession, high unemployment, business failures and household defaults on debt.
This has been deferred until:
JobKeeper runs out on 28th March - expect un-employment (currently 6.9% ) and under-employment (currently 11.4%) to jump significantly by mid-year;
Home loan repayments have to re-start - there are still 240,000 home loans not being serviced;
Small Business loans repayments have to restart - there are still 105,000 small business loans not being serviced;
Insolvency laws have been relaxed giving relief from insolvent trading and longer time periods before winding up can occur – there will be a lag before we start to see insolvencies.
This year there have been an enormous decline in corporate insolvencies. In the September quarter:
Winding up Applications are down by 92% - the ATO has only filed one Application as they were more focused on business support measures rather than recovery proceeding;
Court Liquidations were down 78% during the quarter.
However, don’t feel too sorry for Insolvency accountants, as they expect this situation will rapidly turn around next year. The word in the recoveries areas of the major banks are that they are ‘clearing the decks’ for a busy 2021.
3. THE MELBOURNE PROPERTY MARKET
Now that properties can be open for inspection, property can have presentation work done, buyers and sellers are getting busy. Although outdoor auctions with up to 10 people are permitted, until this number is increased, on-line auctions and private sales will continue.
Prices for residential property (excluding apartments) have been holding up well with only small falls so far. They are still slightly above where they were this time last year.
Agents we talk to believe there will be a big shakeout in the city apartment market coming. New apartments are being completed and purchasers defaulting on settlements. With no tourists, no immigration and no foreign students arriving, rents have been falling. Expect to see significant price falls in newer city apartments in the coming months.
And finally, if you are thinking of auctioning a property, time is running out to sell this year.
We have been busy arranging tradesmen to undertake clean up and presentation works to properties and have them styled ready to launch marketing campaigns over the next two weeks. The very latest you can start an auction campaign is mid-November for an auction mid-December. Otherwise its best to wait until the new year.
I’m sure we can all agree that its great to get out and about after a long COVID winter.
Robert Allanadale, Director