Coronavirus crisis: I have no idea what will happen to property prices!

It’s hard to make predictions.

Especially about the future.

It’s even harder to predict the end point of a moving target.

Property PriceYet, as someone who’s meant to know a bit about our property markets, I’m regularly asked how all this is going to play out?

What’s going to happen to the property markets?

Are house prices really going to crash like those doomsayers keep telling us?

Of course, I realise there are some commentators out there making predictions; but my answer is – I really don’t know!

I realise that’s not a satisfactory answer.

By the way…no one else really knows the answers either!

Yet at a time like this, most of us are looking for someone to tell them what’s going to happen next.

Of course I wish I had the answers.  I really do.

All I can say is I don’t know.

I don’t know how this virus is going to play out, how long we’ll be in lockdown or what the economic fallout will be.

But there are a few things I do know

Phew I hear you say.

I know many commentators want to compare this to the Global Financial Crisis or the Depression of the early 1990s, but this is very different – we are in uncharted waters.

This is a health crisis and our Government has severely restricted our mobility and put our economy, businesses and the property market into hibernation to prevent the terrible human disaster that has happened overseas.

I also know the governments of the world have never ever made such a concerted effort to minimise the economic downside.

I know the Australian government has thrown trillions of dollars, everything including the kitchen sink, to minimise the economic pain for businesses, for people and to protect our health.

I know our property markets have gone into hibernation and this will prevent a freefall of property values as there won’t be any forced sales.

Particularly since the banks are providing a pillar of support for homeowners and property investors with loan holidays or loan deferrals of up to 6 months.

These measures should help to delay distressed sales that would otherwise flood the market.

Transaction levels are likely to be significantly impacted over the next few months, particularly with restrictions in place limiting people’s ability to leave their homes.

But this doesn’t necessarily mean property values will plummet.

So while property values may fall a little in the next few months, that won’t really be a reflection of their “intrinsic value” but more a reflection of the market lockdown.

And sooner rather than later we’ll come to a point where property transactions and prices will once again reflect the fundamentals of the Australian economy, as opposed to the current structural changes taking place.

On the flip side of the coin, suppressed transaction activity means we can expect to see a build-up of latent demand and our property markets will rebound in the second half of the year.

Something else I know…

I know that this is temporary, like every other crisis that has ever been before it.

Property MarketAnd I know that this too shall pass.

I also know that our property market, without warning or anyone ringing a bell, will resume their uptrend.

And most people won’t recognise this until the markets are well and truly on the move just like happened what happened in the middle of last year.

I also know that, based on history, we are entering the zone of opportunity.

Maybe I was wrong

I started off by saying I don’t know what’s ahead but having written all these words now and having a few more concepts to share with you, I realise that maybe I know more than I thought I did.

I know that currently many people are feeling anxious, scared, uncertain.

By the way… it’s O.K. to feel that way – it’s normal.

But it would be very wrong is to act on these emotions.

MistakesWe’ve all heard that Warren Buffett wisely said: “Be fearful when others are greedy and be greedy when others are fearful.”

That’s easy to say, but it’s not easy to do.

However, I’ve seen many otherwise intelligent, rational people make terrible investment mistakes when market sentiment gets to them and they try fix short-term problems with what end up being long-term disasters.

Their emotions took over.

Look at all those investors who sold their properties in late 2018 and early 2019, only to see the property markets around Australia make up all their lost ground and reach new peaks.

Here are a few more things I know

I’m writing this in April 2020 and I know there is a lot of uncertainty in the world.

It’s a tough place for people to be, people just aren’t sure what’s going to happen – they’re looking for a level of certainty.

But there are some certainties I can provide you with.

  • I can say with certainty that in 12 months’ time it will be April 2021. I know that for some people that just seems so far out it’s not even worth thinking about.
  • Another thing I can tell you with certainty is that at some point and I don’t know when this will be, whether in 6 weeks or 6 months; but at some point we will pass a line that I called the “Survival Line.”
    This “Survival Line” will occur when people’s level of desire to move forward overtakes their fear. Some people say it will be when greed overtakes the fear.
  • And another certainty is that on the other side of that survival line will be many opportunities to thrive. Not just in property but in business as well.

Having spoken with many property investors, business owners and entrepreneurs recently I’m finding their thinking in three different ways: –

  1. Some are fear focused. They’re panicking, they’re frozen, they think the world is coming to an end. They don’t have a long-term focus

They are closing down their businesses or selling up their investments.

They can’t see a future for themselves or their businesses and that’s a real tragedy, because they won’t make it to the survival line, which may come around sooner than they think.

  1. Others are going into hibernation mode.

They bunker down. They buy all the rice, pasta and toilet paper they can and stay low to ride it out.

They will cross the survival line but will experience lots of ups and downs in the meantime and lose a year or so of their life in the process.

  1. Then there’s a small group of strategic investors and business owners who are positioning themselves for the future.

They recognise that there is currently a strategic window, the time between now and that survival to get set to take advantage of the opportunities that always abound after severe downturns.

The Elements Of Swot Analysis: Strengths, Weaknesses, OpportunitAs property investors they are working with their consultants to set up a strategic property plan, they getting their financial and ownership structures in place and doing the appropriate research.

They’re not trying to time the market, but they want to take advantage of the opportunities the market is currently and will in the future be offering.

These strategic investors know that people will eventually come out of lockdown and want to get on with their lives.

These strategically focused investors know it looks bad today, it might even look bad tomorrow, but they’re prepared to hang in there, they’re prepared to lay the foundations for their future success.

Despite the headlines, they know that the world will not going to end. They are prepared to bet on humanity.

They recognise that how they think and what they do between now and that survival line will determine their level of success when we move on to whatever our new normal will be.

So how are you thinking? What conversations are you having – with yourself and with others?

In which of these three groups of investors do you want to be?

Now is the time to take action and set yourself for the opportunities that will present themselves as the market moves on

Flat Design For Team Work ConceptIf you’re wondering what will happen to property in 2020–2021 you are not alone.

You can trust the team at Metropole to provide you with direction, guidance and results.

In challenging times like we are currently experiencing you need an advisor who takes a holistic approach to your wealth creation and that’s what you exactly what you get from the multi award winning team at Metropole.

If you’re looking at buying your next home or investment property here’s 4 ways we can help you:

  1. Strategic property advice. – Allow us to build a Strategic Property Plan for you and your family.  Planning is bringing the future into the present so you can do something about it now!  This will give you direction, results and more certainty. Click here to learn more
  2. Buyer’s agency – As Australia’s most trusted buyers’ agents we’ve been involved in over $3Billion worth of transactions creating wealth for our clients and we can do the same for you. Our on the ground teams in Melbourne, Sydney and Brisbane bring you years of experience and perspective – that’s something money just can’t buy. We’ll help you find your next home or an investment grade property.  Click here to learn how we can help you.
  3. Wealth Advisory – We can provide you with strategic tailored financial planning and wealth advice. Click here to learn more about we can help you.
  4. Property Management – Our stress free property management services help you maximise your property returns. Click here to find out why our clients enjoy a vacancy rate considerably below the market average, our tenants stay an average of 3 years and our properties lease 10 days faster than the market average.

NOW READ:

NSW Government announces $440 million coronavirus rental assistance

Here’s what the banks are giving in the way of credit card support | Coronavirus update

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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


'Coronavirus crisis: I have no idea what will happen to property prices!' have 5 comments

    Avatar

    April 17, 2020 Paul

    I would suggest you look carefully at the history of money and banking before claiming CASH IS KING. I may support gold is good or silver is safe, but there are too many examples of governments reducing the value of cash, removing currency, and replacing it with alternative instruments like food stamps. If things are not magically better in 6 months we will all be adjusting our way of living. But that is part of the planning Michael is explaining. Between what is happening to us and how we react is a space to think. That thinking space gives us back control. We may not all think the same and that is the beauty of life. Cheers

    Reply

    Avatar

    April 16, 2020 Amayzingone

    For once MY is starting to be honest instead of a supreme optimist. Congratulations MY. Lets look at the facts to answer a few questions
    1. I dont agree that this is a Health crisis. Its an long overdue economic slow down and created by a long drawn out debt crisis. It has been evident now for quite a while and the exact reason why the RBA has dropped rates over the last year or 2. People are over extended and just cannot borrow any more to fund living well beyond thier means so consumption starts to come to a grinding halt. Its simple maths 101.
    WANT MORE PROOF?
    Back in 2008 the GFC was the result of too much debt. How did the central backs fix it? By creating mountains more debt. So the problem just got bigger and bigger. Debt has expaned exponentially! So now its time for the debt bubble and all that came with it to POP !
    The corona virus just accelerated the “deflationary” unwinding process. A black swan event. In other words, the wake up call. Its now time for all values to go back to normal again. Wages, property prices, shares – everything must deflate from the over inflated prices that we have seen. And nobody denies that prices were way over the top by any metric. Especially in property! (unless you were selliing)
    2. Where is property going now? Thats dead easy MY if you are REALISTIC!
    All the drivers of escalating property prices are GONE and for a very long time. Incomes are evaporating before our eyes, rents are dropping as we speak, interest rates are already rock bottom so cant go any lower to prop up the property market again. Migration too is off the cards for the next year or two at least. Anyone want to dispute any of these FACTS? MY – you perhaps?
    Well like MY Im not making any predictions here but its fairly obvious where things are going. The Heads of the banks have already commented. Head of ANZ bank has said we are going to see a MATERIAL decline in property prices. Not just 2% or 3%. Head of AMP has put in a 20% figure on the decline in property prices. (they came down much harder during the banking royal commission just 2 years ago) Now remember these people dont want to scare anyone so thier predictions are CONSERVATIVE! The banks are already quietly provisioning for huge losses from foreclosures. Dont worry. It will show up the thier latest reports very shortly. Lending standards too are tightening up quite a lot. Its almost impossible for even the best borrower to get a loan. This week a loan officer of the IMB said nobody is being approved for a home loan. OMG! And One of our biggest mortgage insurers is pulling the plug on anyone they deem possibly affected by the corona virus. So now many people must come up with at least 20% deposit plus the transactional costs. Oh dear. That will put a drag on things.
    And what do you you think will happen to all those people in financial trouble that have requested on a 6 month mortgage holiday? Remember that thier repayments have just been added back to the loan principal? Do you think that things will just magically be better in 6 months? Or worse? As I said the banks are currently provisioning for huge losses on loans. They are just not telling us that. Imagine the stampede for the exits if they did,
    So for everyoine asking these questions, dont cover up your eyes. The answers are out there. Just look at the facts before you. If you see any reason for property prices to go up in the near future then go forth and buy property.
    Im not trying to be a pessimist.
    Just reading the facts before me.
    I will let you draw your own conclusions.
    But let em finish n one note. One we havent heard for a very long time.
    CASH IS KING right now.

    Reply

      Michael Yardney

      April 16, 2020 Michael Yardney

      Thanks for that little detailed comment.
      Interestingly different people can look at the same “facts” and come up with different conclusions.
      By the way loans are being approved every day. I can give you firm evidence of a dozen of our clients who have received loans in the last two weeks through their proficient mortgage brokers.
      No of course you shouldn’t go to the bank directly. This is the time to have a great team around you

      Reply

        Avatar

        April 16, 2020 Amayzingone

        Yes I agree with MY. Metropole clients are definitely not your average person so shouldnt have difficulty in obtaining a loan whilst using a proficient mortgage broker goes a long way.

        Reply


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