We’re in the midst of a health war.
It’s a unique war, with every country on the planet united to beat the same enemy.
It’s a silent enemy, an invisible enemy.
A deadly enemy.
This is a crisis that no one alive has faced before on this scale.
But we’re going to get through this.
On today’s show, I’m going to have a chat with Ken Raiss, director of Metropole Wealth Advisory, and together we’ll answer four common questions that we’re being asked about the crisis by clients.
- What’s going to happen to the property market in the short term?
- What’s going to happen to the property market in the long term?
- Are we going to go into a recession? What does that mean for you?
- What should you do about all this?
What’s ahead for the property market in the short term?
Our property markets are most likely going to shut down for a while due to social distancing and lockdown.
That shutdown could last for weeks. But the same thing happens to the market every year around Christmas time. This may be longer or shorter, but it’s not unheard of.
One big difference between this shutdown and an ordinary seasonal shutdown is that there may be less confidence when we start up again.
However, not all segments of the market will be impacted equally.
The upper and lower ends of the market are likely to suffer more. But middle-class areas are not going to suffer as much and will not go down much in value.
Property markets will likely recover quickly because property is such an important part of our economy. Property and construction employ a lot of people.
The government is committed to preventing us from getting into a deeper recession than we need to. They are supporting us in the lockdown and will help the industry move on in the next phase.
The property market has both discretionary buyers and non-discretionary buyers. Discretionary buyers may choose to sit on the sidelines for a while, but non-discretionary buyers will still need to buy. Because of this, the property market tends to be resilient.
What’s ahead for the property market in the long term?
We don’t really know what’s going to happen.
But while this issue will have an impact and will have a short-term effect on our property market, in a year, five years, or ten years from now, this will probably have no lasting effect on the market. The property market has survived bird flu, swine flu, the global financial crisis, SARS, 9/11 and more.
We have strong fundamentals – population growth is high. Immigration may drop for a while, but when this is over, people will still come to Australia.
Interest rates are low and will remain at this rate for at least another three years.
Household composition is changing, and we’ll need more housing to accommodate the same number of people.
There will also be more people renting. For a long time, close to 30% of people were renting. In the future, it may be up to 40%, and investors need to provide housing for those renters.
First-time buyers started the year strong, and they’ll be back because they’re in it for the long term. In general, the property fundamentals and banking system are both sound.
Will we go into recession?
Yes. But you shouldn’t panic.
A recession only means that prices aren’t going up as much as they were historically.
This recession may be similar to the current rate of infection, where most people who are impacted are impacted mildly.
60% of home buyers live in their homes, which means there is less volatility in the property market than in the share market.
During the Global Financial Crisis, house prices fell, but only marginally. And during this crisis, the government is spending a lot of money to prevent the recession from being as deep as it could be.
Recovery will be faster for property than for other areas, especially for those who bought investment-grade properties.
What do we do?
Some people are going to run into financial difficulties during this time.
If that’s you, you should speak to your bank and your mortgage lender.
Presently, you won’t be penalized if you need to reduce payments or even pause your repayments.
You won’t even take a hit on your credit rating.
The government has a moral obligation to help people out when they’ve been ordered to stay home and stop working through no fault of their own, and the banks are on your side in this matter.
On the other hand, some people with sound jobs strong financial positions are in a position to do something during this period.
If that’s you, this is a good time to get a strategic wealth plan.
You need to understand where you are now and make a plan to get to where you want to be.
Links and Resources:
In turbulent times like this why not get the team at Metropole on your side – find out more here
Some of our favourite quotes from the show:
“Having been around for a long time, you’ve already heard me say that recessions really are part of the business cycle. Painful, but nothing unexpected.” – Michael Yardney
“If you’ve got a plan, then you’ve got more control of your life.” – Michael Yardney
“On the other hand, if you are in the position to do something, now is a good time to get set.” – Michael Yardney
PLEASE LEAVE US A REVIEW
Reviews are hugely important to me because they help new people discover this podcast. If you enjoyed listening to this episode, please leave a review on iTunes – it’s your way of passing the message forward to others and saying thank you to me. Here’s how
Subscribe & don’t miss a single episode of Michael Yardney’s podcast
Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.
Need help listening to Michael Yardney’s podcast from your phone or tablet?
We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.
Prefer to subscribe via email?
Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.