Coronavirus impacts on the Canberra property market
As of this morning, the World Health Organisation declared the coronavirus a pandemic. Off the back of rising fear and uncertainty, this news has impacts that we’re only just beginning to see the effects of now.
What are the likely effects of COVID-19 on the property market?
Off the back of an already-rocky start to 2020, confidence is fragile right now. The fires and smoke that engulfed the city for weeks put many Canberrans into lockdown mode. Then came the rain and hailstorms that saw properties damaged and car prices skyrocket, with many locals in a normally car-centric town without transportation. Conversations around town have gone from one disaster to the next, and now with coronavirus taking centre stage it’s building on an already-shaky foundation of confidence.
In the early months of this new decade supply of properties has been very low. Vendors who made the decision to sell in December and January have had their run of auction dates in February and early March, but now that we’re seeing house-hunters concerned about attending open homes and auctions over the recent days this latest turn of events is having an impact.
As a buyer’s agent, I’m seeing more vendors willing to take offers prior to or instead of auction, choosing to take the money and run rather than waiting to see how many (if any) buyers turn up to an auction in four weeks’ time. It’s an unknown that is making an impact immediately. Agents are looking at how they can make changes to adapt to the rapid switch away from public auctions, with some larger agencies exploring online auctions as an alternative.
Vendors are either delaying their decision to sell, placing even more pressure on the already-tight supply side of the equation, or are bringing forward their plans and selling off-market or listing a price in place of an auction. While some agents are treating it as ‘business as usual’, it’s difficult to ignore the growing concern around this topical issue.
With recent cuts to interest rates, that’s also having an effect on buyer behaviour. Budgets are creeping upwards and coupled with the short supply and First Home Buyer incentives, prices are staying strong as buyers have more to spend and fewer options to choose from. Who’s to say how long this will last, but for now buyers need to tread carefully.
There are opportunities for the smart buyer right now
Coronavirus may be present now, but these market conditions won’t be around forever. People will always need a place to call home. True to Warren Buffet’s quote, “be fearful when others are greedy, and greedy when others are fearful” there’s some great opportunities right now for buyers who are willing to check their emotions and buy for the long term.
There’s reduced competition right now, as many buyers are adopting a ‘wait and see’ approach. They’re choosing to sit tight and wait for the dust to settle before making any decisions. Fewer competitors and motivated vendors can make for some great buying right now.
My advice is to not rush in, but to be discerning. There’s a risk in making a snap decision as you could easily overpay for a property, or skim over the due diligence before locking in the deal in the rush to exchange. Look for A-grade properties; you know, the ones with a great floorplan, well-oriented on the block, free from building issues, in a high quality neighbourhood and always in demand though thick and thin.
Don’t be scared by any short-term downturn if that does eventuate. If you’ve got your ducks in a row and finance is looking firm, your job is secure and you’re ready to buy, then do so. Leave your emotions at the door and look at the longer term picture.
Don’t overspend or push your budget. Putting the household finances into a position of stress is not what you want to be doing. Your starting point should be to look at repayment figures and ensuring you’ve a comfortable buffer to manage the tough times. Another of Warren’s fabulous quotes, “only when the tide goes out, do you discover who’s been swimming naked”. Although we’re in a low-interest environment right now, that’s not to say that it’s best for you to spend every last dollar of your borrowing capacity. Consider what’s reasonable for your household well before you start looking at property as this will help keep your emotions in check.
If you’re feeling unsure, plan to sell before you buy. It’ll give you peace of mind for your next purchase, but ensure you try to buy and sell within a short timeframe so that you’re working within the same market. I’ve seen and heard many sellers trying to short the market and getting it painfully wrong. By this, I mean trying to pick the downturn and sell when prices are high, then wait until prices fall before buying again. When you factor in the costs of renting and moving in between, the difference needs to be substantial to make this choice a wise one. The bigger risk though, is finding the right property when you decide it’s time to buy!
And always, seek advice and professional guidance if you’ve any doubt before making such a large, impactful financial decision. Independent buyer’s agents exist for this very reason. www.rebaa.com.au has a list of accredited ones around the country together with free advice to help buyers.