Opportunity & Optimism
The headline I hope has captured your attention. As society changes daily the economic landscape has also been one of many moving parts over the past month. Share market volatility, supermarket sell outs, recent bush fires, and all-time low interest rates. What does all of this mean, and what is the impact that each event will have on the property market, both short and long term.
The health issue didn’t begin as an economic issue; however, the property market is not going to be immune to a changing landscape. It is no secret that the share market has taken a big hit, the coronavirus-induced panic selling shed $232 billion from Australian shares in one week, and only narrowly avoided the worst fall in its history thanks to a late surge.
As James Hall from news.com.au reported; house prices traditionally boom after stock market crashes and investment strategies change. There are 4 major investment streams are property, shares, cash and gold.
Gold is considered by many as a defensive stock, when a dramatic sell off occurs, buyers retreat to the companies that mine the precious metal.
Opportunity exists whenever there is adversity; share market fluctuations offer high risk/ high reward opportunities, but the uncertainty of the gamble will drive many to safer investment havens, such as property.
The downside to low interest rates means that cash in the bank receives next to no interest, and we have seen many buyers who were receiving 0.5% interest on cash, converting this to property where they are achieving 4%-5% returns conservatively.
An enormous opportunity exists in bricks and mortar. It is the most solid form of investment, and this is where great opportunity exists.
The opportunities exist for both investors and owner occupiers. Sellers can capitalise on the increase in activity from investors; there will be a defined increase from investors looking to secure solid yields, and from those that are speculating on the basis of value growth once certainty returns to the economy. The negative impact on a large portion of working Australians will mean that they may need to eat into their savings, putting them in a position where they may need to be longer term renters, as opposed to buyers; this negative impact, will again present a positive outcome for property investors.
There are still many employment sectors that are thriving in the current climate, and for those buyers working in these sectors many are slightly oblivious to the current climate. There are many home buyers who are actively house hunting; first home buyers; medical professionals, anyone in the health care industry; education professionals, those that work in essential services, and many forms of manufacturing. We are seeing increased activity from buyers who have sold in the past 3-6 months and have not yet purchased, and they are determined to purchase property, to capitalise on favourable borrowing conditions. For the opportunist and speculator, borrowing conditions are great and with a willing lender to support you, there is an opportunity to capitalise on pending value growth and solid investment yields. For the owner occupier, the message remains the same as it would in any time of boom or bust; as long as you buy and sell in the same market, you will never be disadvantaged. Fortunately, and unfortunately in terms of real estate there will always be births, deaths, marriages, job changes, upsizing, downsizing, investing & consolidating; there is consistency in activity even without uncertainty. Every home, investment and situation is different, and if you would like any up to date information on buying or selling, please do not hesitate to contact me.