Is now a good time to buy property?
Should I hold off and wait for property values to fall further?
What’s ahead for our economy will we fall into recession?
These are the type of questions from our clients at Metropole that I’ve been answering and these are the questions on the mind of the many journalists have asked me for an opinion over the last couple of days for the various media outlets.
And what I have been telling them is that what started as a little cold for our economy has progressed to the flu and now looks more like we’ll get a dose of economic pneumonia.
Just look where we are today…
Dwindling confidence, a major stock market crash, talk of recession, workplaces closing, major events cancelled, social distancing.
Well…panic I guess!
There is little doubt that it is serious.
While I don’t want to make light of COVID-19, based on my view having been involved in the property market for over 45 years, I believe the impact of this on our property market will ultimately be temporary.
Now, this view may be a little different to what some others are suggesting but remember …this too shall pass.
There is no doubt that the virus will cause illness is some people and tragically even kill others.
And it is now very likely Australia is going to go into recession, with two-quarters of negative growth, but this recession is likely to be different from other recessions.
What we are currently experiencing is like a terrorist attack which will deliver a short sharp blow to our economy rather than experiencing a long drawn out war.
The economy is likely to rebound in the second half of this year at which time we are likely to be experiencing a perfect storm for property.
Our government and the governments around the world have learned a lot about handling monetary and fiscal policy is during economic downturn’s and they are hellbent on making this downturn as painless as possible.
Sure unemployment will rise little, probably to 7%, but that still means that 93% of people will have a job.
And if the government lives up to its promises, it’s stimulus packages will grease the wheels of industry and keep more of us employed.
A lesson from the past
One of the major lessons I have learned from previous downturns is the importance of taking a long-term perspective which always outsmarts short-term reactive thinking.
And for mine, it’s always property fundamentals that really matter and drive our markets in the long term.
Things like demographics, supply and demand, affordability, availability finance, and local economic trends.
Of course, we all know the old saying, being fearful when others are greedy and be greedy when others are fearful….
But it’s normal human nature to find it difficult to buy your new home or invest when everyone else is running around thinking the world is coming to an end.
However, now that I have invested through 8 property cycles, I have found that it is exactly these conditions the present the best opportunity.
That means now is the time to get prepared to take advantage of the opportunities that the market will offer.
After each global disruption, there has been an increase in property prices, and there is no reason to suggest this will be any different as the fundamentals are still strong;
- Record low-interest rates
- Record First Home Buyer numbers
- High immigration (high demand)
- Slowdown in construction (low supply)
So what should you do?
In my opinion for those who have a secure job and their finances organised, this is a great time to buy a home or investment property at a price that you were unlikely to be able to get a couple of weeks ago when the property markets in big capital cities were booming and there were more buyers around than sellers.
It is likely that human nature will cause many would-be buyers to sit on the sidelines for a little while until things become more clear, which means that sellers will be more amenable to accepting offers rather than holding out for a top price.
Remember don’t make long-term decisions like buying a home or an investment property based on the last 30 minutes of news.
There is no doubt there will be opportunities in the market for those who are willing to go against the crowd and when they look back in a year’s time and definitely in 5 or 10 years’ time, they will remember the unprecedented events of 2020 as a great buying opportunity for property.
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