Coronavirus (COVID-19) has far reaching impact. At this point, the food service and entertainment industries are being greatly affected. People are avoiding groups of most any size and that includes restaurants. Convention centres are cancelling events and hotels are losing patronage. Not all businesses or industries are able to allow employees to work remotely. As companies shut down even temporarily that will mean a reduction in income for both the enterprise as well as the employees.
The real estate and property management segments are not immune to this serious downturn in the economy. The intensity of the virus on the population will have a direct impact on the property market. During the time of quarantine and restricted activities you may expect to see:
- Construction will be limited due to the availability of workers. Materials may be delayed or out of stock until developers can see a rebound in the economy.
- Fewer people will be shopping for new homes. Open houses and auctions will decline. Fewer applications will be filed for home loans over concern for lost wages and ability to make mortgage payments. Listings will probably be suspended until the brunt of the virus is over.
- Rentals may see more vacancies.
- The RBA will probably cut interest rates at its April gathering. There are also other measures being discussed to reduce interest rates further.
For property investors, there will be a reduction in market value and sales. With a temporary lull in the market, it will rebound by spring.
If there is a long downturn, the impact will be more significant with even lower prices. It is suspected that the government will consider other methods to stimulate the real estate market and economy in general. Any protracted viral period will result in some degree of recession. The extent of the medical impact will directly relate to the economy.
At this point, it is estimated the GDP growth will be reduced by half a percentage point in March based on the current reduction in tourism and exports. The federal $17.6 billion stimulus package will provide some relief along with cuts in the interest rates.
On the positive side, the Australian people have proven their resilience in the past and there is no reason to doubt that this toughness will reflect in their actions. At this point, it is uncertain how long COVID-19 will impact the marketplace and the economy. It is always prudent to take precautions but without panic or undue fear. A healthy respect for the seriousness of the disease and its relationship to the financial situation of the country is imperative along with a positive attitude and willingness to adapt to circumstances.
In Adelaide SA Stanley Samuels has built its reputation on an honest and ethical approach toward real estate sales and management. If you have any concerns that we may be able to help you with, don’t hesitate to call 08 8297 3010.
