The New Normal of Real Estate
This week, the National Cabinet announced the easing of the coronovirus restrictions in a 3 step plan set to take place over the next few months. As this news comes, many Australians are feeling hopeful that life will return to some degree of normality.
But the question we are all being asked in the real estate industry is, "What does this mean for the real estate market?" And as we drill down a bit further into the topic for those intending to transact a property in the near future, there are more questions coming up including, "Is now the right time to sell or should I wait?" and "What is happening with prices?" and "Is selling even possible right now?"
More than 7 weeks ago in an effort to prevent large gatherings, a ban on public auctions and open for inspections was put in place to help curb the spread of the virus which has changed the real estate landscape and the way we are now doing business. Since then we have been utilising some brilliant marketing tools to continue to showcase our clients homes to the purchasing community including virtual tours, video presentations, Facebook and Instagram live inspections which have all helped to bring more buyers in to consider the properties whilst keeping a safe distance. We have also been using our databases of buyers more than ever before to help connect buyers and sellers who still need to transact a property.
As the restrictions begin to ease, we are now able to conduct open house inspections and also public auctions as long as we comply with safe personal distancing and allow no more than 10 visitors inside at one time. This relaxing of the rules has prompted a new confidence from buyers and sellers alike and we have certainly seen a strong desire from both sides to get back to business as usual.
It seems however that there will be a 'new normal' that we are all beginning to get used to which is a 'normality of volatility' in the real estate space. According to head of research at Corelogic, Tim Lawless, "We saw capital city dwelling values fall by 3.8 per cent over the first six months of 2019, and then rebound by 7 per cent over the second half of the year,".
With the Royal Commission into the banking sector, bushfires in 2019, never before seen interest rates from the Reserve Bank, supply of housing stock and consumer confidence and demand has been extremely volatile to say the least. And this volatility, from where we sit right now, can be considered to be the 'new normal'. Now that we are moving away from the coronavirus restrictions which lends itself better to the practical processes in the real estate business, we are faced with an uncertainty of what the fallout of COVID-19 might bring.
According to research by Commonwealth Bank, house prices could fall anywhere from 11 to 32 per cent by the end of 2022 depending on the growth of unemployment during the coronavirus downturn. CEO Matt Comyn warned of house price falls due to rising unemployment but said that low levels of stock would prevent a sharp drop in the short term. "I don't think it will be pronounced in the near term, but clearly if there is a sustained economic downturn and you've got persistently high levels of unemployment, then that's going to flow through to a number of different sectors including the housing market."
I myself have been a real estate agent for a long time now and have certainly seen the dynamics of supply and demand, employment, interest rates and the ability to obtain finance affect the real estate market. One of the important things to understand right now is that the number of homes on the market is shrinking. That is to say that the supply is drying up although there is still a good level of demand from buyers who need to purchase for pragmatic reasons. No matter the economic climate, people still need to buy and sell. Whether that is because of an expanding family, marital separation, or financial pressures, life will go on and properties will continue to be bought and sold.
I've always been a big advocate for the predictability of the present moment when it comes to selling a property and I've noticed that taking action rapidly to jump in to the market at any given moment is far safer than waiting to see what the future will bring in terms of what you can expect to sell for. The reality is that there are quite a lot of people in the 'wait and see' camp still and those people will eventually end up with their homes on the market along with a lot of other homes which will mean an abundance of choice for property buyers and this normally comes along with downward pressure on prices.
Volatility is now the new normal and waiting a long time to see what happens may not be a sensible way to go given what we have become used to seeing and now also with the benefit of hindsight. In other words as the old saying goes, a bird in the hand may be worth more than two in the bush.