Making the most of the Modern Market
What is traditionally the most active time of year, Spring 2020 is looking like it will be a little different. Different, but not necessarily negative.
The lending landscape, current unemployment rate, and fluid consumer sentiment are all showing signs of a balanced market for the next 2 years. The challenges we are presented with in this current climate, are also factors that create exceptional opportunity. We have been fortunate in the past 5 – 10 years with the changing employment landscape.
In the time since the closure of Ford and Alcoa, for every job that we have lost in the industrial sector we have gained 7 in Government, Finance, Health and Education. These sectors have been the driving force in our marketplace over the past 4 months and will continue to set the tone for the foreseeable future. There are many employers currently make decisions to future proof and one of the key outcomes is going to be more and more people working from home.
There have been several key financial institutions that have already committed to having their work force work from home, with employees now only working 40% – 50% in the office and the rest at home.
As people are spending more time at home the flow on effect through the market will positively influence rental yields and sale values. There is no doubt that there have been fewer homeowners looking to sell at the current time due to Covid, however, those that are thinking about buying up, downsizing, or investing, now is a great time.
The crucial element is buying and selling in the same market if you are home buying, you may have to negotiate hard on the sale of your home, but this will give you a licence to push hard as a buyer. We are seeing a surge in activity from medical professionals; doctors, nurses, and other health care workers; the banks love them as they are deemed as low risk lenders in many cases.
There are many Government sector employees working from home, who have identified that they do not have enough space, so they are looking to upsize; and it is also this market that is driving the rental market.
Investors have been cautious, and that is understandable; those with investment properties were/are concerned about their tenants ability to pay rent; the new restrictions on issuing a notice to vacate has delivered some unease; and non-existent rent increases have deterred some investors. The next 6-12 months we will see some strength back into the investment market, with 2% interest rates, balanced against 4+% rental returns.
At the moment an investment property should be part of your long-term game. Interest rates will remain at the current level for 2 – 3 years, yields will slowly increase as the demand for rentals do; then in years 3 – 5 I would expect to see an increase in asset value. I anticipate a growth in demand for rental properties across most price points over the next 12 months.
Some will look for bigger homes; others will return to independence and move back out from mum & dad; there will be many first home buyers that have to put off buying for another 2-3 years so they will rent and take the time to save; and then there will be those that are simply cautious and wish to limit their risk and exposure by leasing as opposed to buying.
If you would like any advice on the current market; future potential, or simply looking to capitalise on the current market activity, then please do not hesitate to reach out.