A re-imagined real estate industry responds to COVID-19
Published on 02/04/2020
As we are living in this time of uncertainty the real estate industry remains in business, just not as we know it. Keyhole Property Investments are constantly seeing changes in the industry in terms of inspections, auctions as well as property management. We have kept our eyes and ears open researching ways to still be able to provide the high level of service people have come to know and expect. We are preemptively evolving alongside this COVID-19 pandemic by upskilling and innovating the way we do things.
With many people across the board losing their jobs, government officials have urged them to speak with their banks to “freeze” mortgage repayments. This will be imperative for some investors to negotiate as some tenants will not be able to pay their full rent if any. Hopefully this will assist in lowering numbers of distressed sales as the Morrison government has put in place a 6 month moratorium on rental evictions.
What impact has COVID-19 had on the Melbourne residential property market
With many renters being younger and less financially stable than established renters or owners they are being hit hard. Many are casual employees in hospitality, tourism and entertainment and have lost their ability to earn. So, a lot of them have gone from income to job seeker payments overnight. Some will be moving back in with parents.
Unless tenants need to relocate, there are very few tenants wanting to move at present. This creates less demand for rental inspections, this in turn can be quite unnerving for landlords.
We will also be seeing a greater number of rental listings on offer because landlords who were renting via Airbnb will be needing to turn their investment properties into long term rentals for income as tourism has dried up.
This rental stress will pass onto the landlords if the government and Banks do not handle this well.
Buying and Selling now
Student accommodation will suffer because many students have already gone home but these are not the type of properties KPI recommend.
According to realestate.com.au from March 2019 to most of March 2020 there has been an increase in buyer activity searching online for property. Buyers were back and hot from the start of the year and auction clearance rates were strong. With the onset of COVID-19 some buyers have gone into hibernation, a bit like Christmas but certainly not a having a Christmas vacation and some are no longer in the position to buy. For Melbourne buyers, student accommodation will suffer but these are not the type of properties KPI recommend. It could be a good opportunity to venture into areas that were becoming unaffordable at the beginning of the year. Because as we gain more certainty it will provide confidence for more buyers to return to the market meaning more competition.
With restrictions on social distancing, auctions have turned into virtual auctions and we have seen properties perform well for Vendors even though it is a different playing field for auctioneers not been able to read the crowd, or use their personality to coax buyers to bid more. Some properties that had a forthcoming schedule auction have been converted to a private sale. Viewing of properties for either selling method are by private appointment and up to two people at a time. Even with these imposed restrictions, activity has not gone away.
We are not seeing signs of distressed selling at this stage, however with less buyers around there will be some good opportunities to buy well for the astute buyers.
First Home buyers
realestate.com.au said that the level of enquires on their site have dropped 20% in March 2020. This is not surprising as a lot of confidence, uncertainly and perhaps affordability due to loss of income would apply.
realestate.com.au said the level of enquires had dropped 33% however what they have noticed is that investors who were searching earlier in the year were now looking at better suburbs. Some investors will be waiting for prices to drop and get into better locations that were unaffordable at the start of the year. They don’t want to sit on the fence for too long as the window of opportunity will pass by quickly and not all properties will sell at discounted prices.
What are Governments Doing
Governments are spending a lot of money trying to assist but they still have long way to go. Governments have traditionally relied on tax payers money such as stamp duty and other duties to have access to funds.
A reduction or freeze on Land Tax will help landlords affected by loss of rental income. The government have advised that open communication is needed between tenants, agents and landlords to come to a mutual agreement as to how we can safeguard and benefit each party so that this does not become a larger problem.
At this stage we don’t see the government reducing or freezing stamp duty, land tax or any other duties anytime soon, despite the speculation around a freeze on land tax. They need these funds to roll out support services.
This not a financial crisis, it’s a “productivity crisis” due to COVID-19. The fact that China is recovering is good news for Australia and we are told that the curve is flattening. As we come through this, the better days will be more so and the bad days less. The confidence in the property market should return strong as we have low interest rates and great access to finance with buyer demand not being met pre COVID-19.
If you are needing any property advice whether that be buying, selling or leasing KPI are here for you. Let us help you navigate the property maze. Contact us
AKA “The Property Lady”