Investing in property can still bring great rewards even in an uncertain market
Buying a property in 2020? Here’s what you need to know
If 2020 was the year you planned to upsize, downsize or take the plunge with an investment property, COVID-19 might have seen you put those plans on the back-burner.
While 'appointment only' inspections, the cancellation of auctions, tough employment and economic conditions have certainly taken a toll on the property market, we’ve taken a look at the real impact of the pandemic on real estate (so far), and explore what you can expect to see in the coming months.
The good news is that 2020 may still be your year to purchase a property, but you will need to be smart and strategic to climb the property ladder in the current market.
Houses are still yielding returns for those selling
While the headlines are pessimistic when it comes to the property market, the numbers are telling a more positive story at this point.
According to CoreLogic’s May Hedonic Home Value Index, the Australian property market is holding steady at this point, with only small signs of price decline for those looking to sell.
For example, those selling in Sydney in April realised an average price growth of 0.4 per cent and an annual price growth of 14.3 per cent. Home values in Melbourne dipped by just –0.3 per cent but prices are still 12.4 per cent higher year-on-year.
Some cities are even bucking the six-month average growth trend, with Perth (+0.2 per cent), Adelaide (+0.4 per cent) and Darwin (+1.7 per cent) all showing growth and demonstrating resilience in a weakening market.
While these figures show that the Australian property market is resilient, it is not business as usual, so we have compiled some ideas of what to expect if you enter the property market in these unusual times.
Patience is a virtue
If you’ve been turned off by hot markets or the stress and pressure of going to auction, now could be a perfect time for you to look into buying.
According to Domain, 26.1 per cent of the scheduled auctions for the ANZAC weekend in Sydney went ahead as virtual auctions, and almost half of all properties (44.3 per cent) have switched to private treaty. While auction bans have been lifting around the country, agents aren’t necessarily rushing back to in-person auctions for all properties. Which means now could be a great time to put in a bid without the pressure that comes from a traditional auction.
You could also have the added benefit of avoiding crowded home opens, with many homes available to inspect online or with a one-on-one viewing, allowing you to take your time and inspect at your own pace.
The impact of COVID-19 restrictions on the property market along with the economic outlook is slowing the property sales process down. Buyers need to be aware that it might take them longer to sell their existing property than anticipated and that the sales process for the home they wish to buy could take longer than they expect too.
In this scenario, it’s important that buyers don’t become overstretched financially.
Investment properties require a long game plan
If purchasing an investment property was on your 'to do' list, you’ll need to think carefully about how to reap the benefits of your investment.
The pandemic has had a material impact on Australia’s short and long-term rental markets. For short-stay rentals, lockdown laws have effectively dried up their income, however this market may bounce back somewhat with domestic tourism once travel restrictions are lifted.
Longer term leases are also feeling the impact of COVID-19 with national vacancy rates, according to Domain, reaching 2.5 per cent in April, up from 1.8 per cent in March.
Long term lease values are also in decline with 13.1 per cent of live listings in Sydney discounted in April, compared to 5.7 per cent in October 2019 while discounted listings in Melbourne jumped from 2.8 per cent to 10.7 per cent over the same period.
Investors will either need to be prepared to wait a little longer to secure a tenant, or could instead look for renovation projects during these challenging times.
If the thought of an auction made you hot under the collar, now is a great time to buy.
Use the conditions to your advantage
If you can’t find your dream property or are worried about being over committed in the current market, there are other options to consider.
For example, you can find many long and short-term rentals at a competitive price that will give you an affordable opportunity to explore a new neighbourhood or lifestyle without having to buy.
The most important takeaway if you are going to proceed with purchasing a home, is to use caution, do your research and if you have any questions about your financial position, your mortgage broker will be able to assist.
The opinions expressed in this article are the opinions of the author(s) and not necessarily those of Resimac. The above is general commentary only and is not advice tailored to any individual’s financial situation. We recommend seeking advice from an insurance or finance professional before implementing changes relating to your finances.