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  • Writer's pictureSimon Wendt

The impact of Coronavirus on Real Estate

The recently announced pandemic COVID-19 coronavirus has prompted discussions and fears amongst Victorians about the the potential impact on real estate sales.

It has been reported the virus could also affect the development sector which remains dependent on offshore investment activity particularly from mainland China, Singapore and Hong Kong. Many of the materials used in the construction of homes in Victoria also come from China which may cause a disruption in the supply of some items and therefore a potential delay in construction.

The potential for general consumer sentiment being affected overall leading to buyers becoming concerned about attending public open for inspections and auctions due to fears of becoming infected with the COVID-19 virus may still occur in the coming time.

Whilst these impacts will remain to be seen for the time being, we do know that the stock market has seen some notable changes with CNBC reporting, "The Dow Jones Industrial Average plunged 1,400 points, or 5.6%, to a new low on Wednesday as the World Health Organization declared the fast-spreading coronavirus a global pandemic.

According to a report in The Guardian, Researchers at Standard and Poor's predicted the coronavirus would deliver a bigger hit to the Australian economy than the global financial crisis did in 2008. “We believe Australia’s economy will move into recession by June 2020, and grow just 1.2% in 2020 before rebounding,” the agency said in a note to clients.

It said a recession and the government’s “imminent stimulus package” would not put at risk the country’s AAA credit rating, which helps keep the cost of commonwealth borrowing low.

Whilst the fears and discussions around how coronavirus may affect the real estate market and values are ongoing, we are yet to see much of a real effect on day to day activities within the real estate business with no sign of any reduction in inbound enquiries, open house and auction attendances. At hockingstuart / Belle Property in Mentone, we certainly have not seen any change in values and have in fact seen property prices return to their peak values of 2017.

According to a report in The Age, "In Mr Martine's regular economic update, the Treasury boss pointed to the real estate numbers for February and noted that Melbourne property was back to its boom-time high. "Conditions in Victoria’s housing market continue to improve," Mr Martine said.

"The CoreLogic Home Value Index for Melbourne increased by 1.2 per cent in February and was up by 10.7 per cent over the year."The Melbourne index is now equal to its previous peak in November 2017."

This author reports the conditions to be business as usual at least for the time being and expects solid sales results in the foreseeable first half of 2020. If some people opt to 'wait and see' before making the decision to sell, this may cause a reduction in supply which we expect will, along with a .25 basis point interest rate reduction, help keep values strong and market conditions buoyant.

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