There was a feeling of “business as usual” as we entered the New Year, the Banking Royal Commission is now a distant memory which achieved very little. The Federal election held in May 2019 would have had a major impact on the property market if Labour were elected but we saw Bill Shorten talk the Australian public out of voting for him and Scott Morrison fell over the line with a Steven Bradbury-like finish.
With the Coalition staying in power, property investors re-engaged with the scrapping of negative gearing being taken off the table. Jump to 2020 and we have seen further surges in property prices which started around October 2019. FOMO or “Fear of missing out” has returned and buyers are frantically trying to put their foot on a property before prices jump beyond their budget.
Looking a little closer as to the reasons the market has shifted so quickly:
- Historically low interest rates – money is cheap and with an interest rate cut last Tuesday and talk of another in the next month or two, it is very attractive to buy and lock in the interest rate for as long as possible.
- Lack of stock – in particular there is a shift in how people are trading from one property to the next, buyers have done a 180 flip from what was normal practice, previously selling before buying to know how much they had to then spend on the next property.
The new norm is buy first sell later. Buyers are now comfortable in staying put until they find the perfect property which prolongs the buying cycle, they are willing to wait for the 10 out of 10 property, whereas in the past they would have probably purchased a property which came reasonably close, with compromises. The problem is, if a property ticks 10 out of 10 boxes for one buyer it is probably going to tick the same boxes for other buyers and only one buyer can own the property. This creates greater competition for the limited stock and for those buyers that missed out, their property does not come to market!
Two major events we need to mention which will have long lasting effects are the catastrophic fires over our long, hot, dry Summer and the Coronavirus (or COVID-19). The fires which devastated many regional areas of NSW, Victoria and Queensland will take years, if not decades for native bush lands to recover and regenerate and for the people of these areas to rebuild homes and businesses which, in many cases will not be viable. Listening to a National radio program recently, they suggested a large number of those houses lost were under insured and the cost to rebuild to today’s building standards will be more expensive than what the insurance payout will be. This puts these people in a very difficult situation, do they stay and rebuild or take their insurance payout, sell the land and relocate. The expert who was being interviewed suggested there will be a large number of people, who are now battered and bruised, will take what they have been left and move to the cities, this will create more demand on what is already a property market in short supply.
The other issue we are facing at present and is Coronavirus (or COVID-19). It is sending shockwaves around the World and if the panic buying of toilet paper is anything to go by we are in big trouble., there is obviously not enough 3 ply to go around! What is going to be interesting is what effect the Virus has on Australian expat communities and more specifically in Hong Kong where there has already been riots and civil unrest which has gripped the city for months. The expat community residing in Hong Kong and Singapore who may have been contemplating a move back to Australia in the next couple of years may just re-evaluate their plans and bring their move forward, especially if they have a young family. We, as a company, are already seeing increased enquiry through our business and personal relationships. Just a side note to touch on how the Coronavirus is affecting the Chinese economy, a radio program suggested that new car sales were down 92% which is just staggering and Chinese authorities have ordered a number of factories to halt production of their normal manufacturing and switch to producing medical face masks. Scary stuff!