Whenever there is uncertainty in the markets, a close eye is cast over the property markets and the media enjoys going into a frenzy about a property market crash.
At the moment, the JobKeeper payments are hot on everyone’s lips and whether the end of the JobKeeper scheme in March 2021 is going to send the property market into a crash.
But, the property markets are more complicated than this.
The property markets are still full of a lot of opportunities, and I don’t forsee the end to JobKeeper payments sending property prices into a decline.
Consider this, if the property market was solely reliant on the JobKeeper payments, then we would have expected to see a huge surge in property prices upon the announcement of the JobKeeper scheme, and again on the announcement of the JobKeeper payments being extended, but we did not experience this surge.
The current situation has shown the resilience of the Australian property markets.
The reason we have seen property prices remaining stable, despite the pandemic, rising unemployment, and the changes to the way we buy and sell property, is due to a combination of contributing factors.
Low interest rates, low housing supply, decline in building approvals, and Government incentives have all contributed to the strength of our property markets.
I believe that the historically low interest rates are here to stay for a while yet because the Government’s focus is on stimulating the economy, in particular the suffering retail sector which has taken a huge blow from the pandemic. Any increases to interest rates will only impact household spending and hurt the retail sector further, which is a result they are trying to avoid.
The lack of housing supply is the result of sellers holding back from selling their property until the uncertainty around the pandemic ends, but there is still plenty of demand from buyers. This restriction of supply has cushioned a large decline in property prices and this has nothing at all to do with the job keeper scheme!
The last thing the Government wants will be a major housing downturn and we have already seen measures taken to prevent that, with the mortgage holidays and the announcement of the New Home Builder and Renovation Schemes alongside the existing First Home Buyer Assistance Scheme, First Home Owner’s Grant and the First Home Loan Deposit Scheme which means if you’re a first home buyer, you can access up to $80 000 to help you into your first home.
I am not expecting the markets to slide when JobKeeper payments end.
Many are predicting the property markets to slide once the job keeper payments end. I know that there will be a few casualties that won’t see it through to the end of the pandemic, mainly small businesses, cafés/restaurants and retail that haven’t been able to adapt or downsize, but we have also seen a lot of savvy small businesses be able to reinvent themselves and adapt to the new reality. Once we are on the other side of this pandemic, a large majority of people will get their jobs back, and job seekers will start to be able to find employment and we will see the unemployment rate decline as we return to business as usual.
In most States, we are already starting to see that which is why I just don’t see that the outlandish predictions of 20% unemployment will come to fruition. For Victoria, unemployment will rise as a direct result from the extended lockdown, which isn’t good for the nation’s economy as a whole but this will also come to an end and the majority of businesses will be able to reopen and life will begin to resume to normal. Economists are predicting house prices to crash, some up to 30% or more, but I doubt we will see prices decline anywhere near as much.
Another concern about the state of the property markets is coming from the CEO’s of the major banks and lenders who are suggesting we will see a crash once the mortgage “holidays” and deferrals come to an end. However, once things start to return to normal the majority of people will have a job to go to and we have seen cases where people are taking advantage of the mortgage holidays because they can, not because they have to.
What we’ve seen in the property markets in the past 6 months has actually surprised the property pessimists.
Understandably, we have seen a bit of weakness in the Melbourne property market but across the country we have seen the resilience of the markets particularly in the bottom and lower tier houses and units where prices have remained fairly stable and demand is still prevalent in this price bracket.
My prediction for the outlook of the property market for the remainder of the year is that we will really see a rebound as Buyer’s confidence improves, as they start to take a advantage of the low interest rates and Government schemes. Due to our response to the Coronavirus pandemic compared to many other countries, Australia is being seen as an attractive destination for skilled migrants, international students as well as tourists which will all be additional stimulus to both the economy and property markets once international travel resumes.
We may not see our world return to normal for a while yet, but the impact on the property markets due to the pandemic is likely to be much less severe than originally predicted by economists back in April and as buyer confidence gains momentum, we are likely to see the property market go from strength to strength.