As we adjust to the impacts of Covid-19 we’ve seen a number of wide ranging trends in the "coronavirus property market." While activity has bounced around, people are still buying and selling homes, new homes are being built and new apartment projects are at varied stages of development. However, there are a few notable trends.
Lockdown and closed state borders have had a huge impact on how many of us currently live. And one immediate impact has also been that many of us are rethinking how and where we might live. Buyers and sellers are also rethinking their priorities and timing.
We’ve seen work patterns change, and with less commuting time, there’s been demand for more space and a bigger garden. This has seen strong demand in some outer suburbs even with pockets of under-supply emerging.
Major real estate websites have also reported much more search activity as buyers either window shopped or sought to make a new home a reality. Possibly encouraged by what could easily be described as competitive and ‘cheap’ home loan rates.
As the path towards an eventual purchase can often stretch over almost 2-years, robust early search activity could be a pointer to stronger demand in 2021-2022. This is a notable trend because in the same timeframe (2021-2022), future supply is predicted to be sharply falling.
Regional markets have also seen a big lift in buyers searching for options outside the major cities, often concentrated within a band of 100-150kms travel time. Although it remains to be seen if this could be a fundamental shift in demand or more a short-term reaction to COVID.
However more defined trends will depend upon the ups and downs of a race for a vaccine and how regional infrastructure adapts to growing populations.
But, the property market, at least in the short term, is also being impacted in other ways. Stamp duty for example is very much back in the headlines alongside varied government and private buyer incentives. Such incentives are always a sign of shifting market sentiment.
The emergence of a defined built-to-rent market is also a sign of a change in property investment priorities, but also a stronger confirmation in how people might shift away from direct ownership. BTR will become a stronger trend with greater security via longer lease terms.
There’s also been strong demand for prestige homes and while this might just be limited to few wealthy buyers it’s still a vote of confidence in the property market. A recent sale in Sydney’s east for a reported $95 million is just one example.
I’ve also seen varied comments suggesting that the lack of overseas travel has seen some of the money (saved) diverted into property or at the very least the renovation of existing homes, including expensive homes.
There’s also more activity among rightmovers with a jump in enquiry. This could be driven by less general demand and hence less competition putting ‘cashed-up’ rightmovers in a better frame of mind to act now.
One big questions is the possible added pent-up demand that might emerge when all lockdowns finish, and health and economic outlooks improve. House prices are currently difficult to predict. Since the pandemic started, house price forecasts have ranged from falls of 3% to a drop of 15% or more.
However, one major bank has now revised their view and predicted a more stable outlook and more modest price falls. But if we see pent-up demand continue to build then by mid/late-2021 there is now some expectation that house prices will rise.
However, many of these predictions are based on buyer enquiries, and not material sales and should be treated with some caution. People might want to move, trade up or down, but can they? Banks are being encouraged to lend and that includes to first time buyers with lower deposits however, in some markets higher deposits are being sought in the face of potential high levels of unemployment and FHB activity is mixed.
Although on the brightside with record low interest rates locked in for the foreseeable future, some lenders are very keen to offer mortgages – as long as you have enough of a deposit. And we are also seeing loan incentives on offer to new and existing customers.
Taxpayer funded furlough, mortgage holidays and a ban on evictions have so far softened the looming economic reality. However, even with some extensions of assistance into 2021 there may be a risk next year, not so much of big price drops but a market where activity flatlines or stagnates.
There may be some pain instead felt by renters and investors. Investors are already rushing to secure refinancing deals. Homeowners however, will be able to take advantage of low interest rates to remortgage, and this will hold back many possible forced sales and further dampen supply.
The property market for the next 6-12 months will be anxious to avoid any sense of uncertainty, and hence incentives and quality will continue in many but not all markets. What we need to remain alert to is the potential psychological effects of lockdowns, alongside international border closures helping to restrict immigration and the pandemic fuelling economic concerns.
Access to finance, stable employment and the security of already owning property may well be the key drivers of demand, while lower demand may be less impacting as new and established supply dries up.