COVID-19 Pauses Some People's Property Plans
Updated: Mar 23, 2020
As the global community takes defensive action to avoid the novel coronavirus COVID-19, the local community are feeling the shockwaves reverberate throughout peoples personal and financial undertakings and it appears that the property market is not unaffected.
As a real estate agent, I have already experienced people who would otherwise be putting their properties up for sale, decide instead to wait-and-see and put the plan to sell on hold for the time being. Some individuals aren't really sure why they are pausing their plans but underneath they feel that there may some detriment to their result if they embark on a journey to sell at this time. They may be correct in thinking this, but they may not be correct either, it really is too early to tell.
On one hand there may be less confidence from prospective buyers becase they may be nervous about losing their job, or being able to obtain the loan they need to secure their next property because they think the bank may take a cautious approach to lending. The stock market has taken a hit as a result so the net position of those that are exposed to share values may be reduced leading to individuals being in a 'weaker than before' position. This may cause investors to put their plans to invest in real estate on hold. Residential tenants whose jobs are affected may struggle to make rent payments which can have a flow on effect on the landlord who may also be experiencing such difficulties themselves.
On the other hand, as more people hold off on their plans to list their home, this may cause a dynamic of fewer homes on the market thus reducing the supply. It may well be that the demand also reduces somewhat, however the demand already outweighs the supply of homes on the market in residential Melbourne so further reducing the stock available might lead to a concentration of buyers for the properties that are up for sale, leading to more competition between buyers and therefore higher selling prices. Furthermore, in volatile times, people tend more towards ownership of 'bricks and mortar' as a safe haven for their money as history has shown it to be a safe investment over time.
Alternatives to conventional practise
Real estate agents can be resourceful in how we go about our business to help vendors properties attract as much attention as possible despite the changed conditions and have already put in place alternative ways of inspecting a home prior to purchase. We can record virtual tours that allow the buyer to 'inspect' the home from the distance of their smartphone or computer screen. We can also show video walk-throughs of properties or if people want to avoid other people at this time, we can facilitate inspections by appointment and if vendors wish to take a less public approach, we can utilise our databases of buyers to connect them to willing sellers to complete what we call an 'off-market' transaction. Provided we take the required safety measures, the actual decision to buy and sell a property, and the legal and practical side of things that needs to happen to convey a piece of real estate from one person to another can easily still take place despite the changes we've discussed.
Temporary state of play
One thing for certain is that the current state of play is not permanent and like all things it will pass with some time. We have experienced obstacles many times in history when it comes to the property market and we can now look back on those events and see in hindsight where the opportunities were. It seems that most people go with the crowd when it comes to property, for example selling when the prices are rising because they feel confident of a good result yet the alternative which would be waiting until the growth had ended, would have led them to a better outcome. In this case, the alternative ought to be considered for those that are considering not selling at this time instead opting to reconsider it in the future.
The alternative option to selling now
If you were going to sell now and are deciding whether or not to postpone your plans you need to consider that the future market may not be better than the current one. There is no guarantee that the prices will remain steady or increase despite waiting it out. According to economic forecasters, Australia will be technically in a recession by the second half of 2020 which comes along with its own set of worries for those buying and selling property. Let's also not forget that it took up until now (or late 2019) for the property values to recover to the peak prices seen in 2017 after the correction the market experienced and those that waited back then, had to wait quite a long time to get back to where they could have been should they have bitten the bullet at the time.
The dynamics right now
Right now in the midst of the coronavirus chaos, we are still seeing good signs of life and good results occurring throughout Melbourne. Auction clearance rates on the weekend just passed were 71% sold from 1091 auctions. Thats a lot of auctions and a lot of buyers and sellers still engaged and active with more than 7 out of 10 selling on the day. Open for inspections are still very well attended however there are a few more requests for inspections by appointment. Property prices have not seen a decline. Not in the medians and not in the individual results to date, in fact there are some extremely strong results being achieved right now. Now more than ever, people know that a home is probably the safest place to be and they also know underneath they are probably going to be able to sell out of one and buy into another without too many problems.