One of the most asked questions since the COVID-19 outbreak is exactly how coronavirus will affect house prices, and if now is the best time to buy a property. The pandemic has flipped the property market upside down and has effectively changed the game.
Changes to in-person auctions and inspections have made it hard for real estate agents, sellers and buyers. But on the other hand, we have also seen a fall in interest rates, easing credit conditions and pullback in strong buyers. Despite the numerous challenges it involves, the housing market is extremely lucrative to buyers who are interested in purchasing a property sooner rather than later.
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How the Australian market is holding up
Because the share market looks into the future performance of the economy, it has dropped quickly and significantly due to the COVID-19 crisis, with hopes to recover quicker after the pandemic is over. The property market is also indirectly affected by this, though taking longer to recover as it moves at a different speed. The number of settled property sales in Australia has taken a hit, falling by about 40% in April.
Less competition in the property market may present an opportunity for those that are in a position to buy a house. If you’re still employed and have the capacity to borrow money from lenders, interest rates are very low (almost at zero). With a lot of buyers now sitting on the fence whether or not they should purchase, it could prove very advantageous for a serious buyer.
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What’s changed for the property market?
There are currently country wide restrictions to how property inspections and auctions will work. These are slowly beginning to be eased in some states, but all states in Australia still have some sort of restriction in place.
- Instead of open public inspections, those that are interested must register for a private inspection with a single real estate agent (this has been eased by some states, see below.)
- Auctions are either held online, on the phone, or via private treaty.
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Inspection and auction regulations
NSW: Online auctions and public inspections are now allowed. However, social distancing must be maintained at all times, and those that attend must sign a record of attendance to be kept in case anyone contracts the virus.
VIC: Victorians can now attend inspections and onsite auctions, but it can only be up to a maximum of 10 people in a single property, including the real estate agent.
QLD: There are currently no inspections or onsite auctions allowed. Restrictions have been eased for private inspections however, to six people at a time including the real estate agent.
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ACT: No onsite auctions or open inspections are allowed. Private inspections remain the same with one person (or family) and one real estate agent.
NT: Real estate open inspections and auctions can be attended
WA: Restrictions have been eased for public inspections only. Only a maximum of 10 people (including the real estate agent) can intend an inspection at a time. Auctions are to remain online for the time being.
SA: Auctions and inspection regulations have been eased with 10 people max in the property and the four square metre per person social distancing in place.
Is now the best time to buy a property?
It’s hard to say with 100% certainty that this period is the best time of all to purchase a house. However, in this current climate, those who are in very secure jobs are in an improved position due to the weaker position of the real estate market. COVID-19 has taken out two segments of buyers – those who are sitting on the fence (they are adopting wait before action approach), and those who are simply unable to buy due to employment issues or reduced income. There is now less competition as these types of buyers will be taken out of the housing market.
Looking at the real estate market itself, there are currently very low-interest rates on offer. Low-interest rates mean lower loan repayments. Although home loan approval is quite tricky in uncertain times like these, if your job and income have been stable then you have a higher chance of getting it approved.
With competition drying up, interest rates dropping and house prices also predicted to take a dip, now is a great time to buy, Michael Yardney states. The CEO of Metropole Property comments on this trend, saying “One of the major lessons I have learned from previous downturns is the importance of taking a long-term perspective. I have found that it is exactly these conditions that present the best opportunity. That means now is the time to get prepared to take advantage of the opportunities that the market will offer.”
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Tips for buying a property
Do your research
Although there is increased bargaining power and more options available, don’t fall into buying something just because it’s cheap. Buyers might be tempted to buy because they deem it as a bargain, but something selling cheaply might be so because of other factors such as poor location or future roadwork developments. Make sure you’re buying for the right reasons and looking at the long term brief. Before putting in an offer for a property, remember to do the fundamental research such as demographics, supply and demand, affordability, current and future trends and what will be driving the property market long term.
Get in contact with a buyers agent
With so many changes to public auctions and inspections, many sellers and real estate agents are turning to off-market opportunities, settling with private treaties instead. Fewer parties will be available on the open market, meaning you could potentially miss out on dozens of other houses. Using the services of a buyer’s agents will help you get access to more properties and level the playing field. Buyer’s agents are legally licensed to represent the buyer and usually have more knowledge on the area and market
Move quickly and negotiate
Negotiations and deals are now becoming less predictable and occurring in shorter time frames. Sellers are looking for certainty so buyers could be missing out on rapid deals if they’re not moving quick enough. If you’re interested in buying a property, organise private inspections straight away and make an offer before anyone else does. If you make an offer with as few conditions as possible and cut the settlement period, you could also potentially get a bargain.
What the future looks like for buying
No one can completely predict the future, so it’s hard to say what the economy will shift to in the future. 2020 has certainly been a tough year for the economy. Although Australia is currently in a recession, it is predicted to bounce back after the pandemic, and the Government has taken drastic measures to ensure it doesn’t fall too low.
The Reserve Bank of Australia has mentioned a rebound in the second half of the year that will boost the economy by next year, fluctuating the property market back up to ‘normal’. As more people go back to work, and more businesses start opening, the property market will also return to normal (with a potential increase if the market booms following COVID-19).
Words by Joanne Ly
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