WA Unveils Housing Boost

The $150m housing investment package

The state government of Western Australia has unveiled a $150m housing investment package in an effort to boost the residential building sector.

The news could not have come at a better time for the residential building industry, which has already reported a 50% reduction in pipeline as a result of the COVID-19 outbreak, said Cath Hart, executive director for WA at the Housing Industry Association (HIA).

“Supporting and sustaining job-creating sectors such as construction through the pandemic will be vital for economic recovery. It will create much-needed additional activity across the residential building supply chain,” he said.

Around $19m of the package will be allocated for 200 additional shared-equity homes. These will be delivered in partnership with Keystart.

The Housing Industry Forecasting Group recently reduced its forecast for new dwelling commencements in WA for 2019-20 by 19% – from 15,500 to 12,500, the lowest level ever, adjusting for population.

“This downturn will hurt businesses and workers in the home-building supply chain over at least the next 12 months. Unfortunately, many in our industry are not eligible for the JobKeeper safety net because of the way state governments regulate home-building progress payments,” Hart said.

Latest figures from the Real Estate Institute of Western Australia (REIWA) show that the Perth residential property market is already feeling the impact of sluggish building activity.

Damian Collins, president of REIWA, said the number of properties for sale and rent has already hit a six-year low.

“Perth’s property market has been showing signs of recovery since October 2019, and while COVID-19 may delay this, it most likely won’t stop it,” he said. “The state’s economy is coming back much quicker than many experts thought, and as long as it continues to recover, it is unlikely the property-market recovery will be reversed.”

Collins said the limited stock will help support prices. He said the average discount accepted by sellers has reduced to 7%, lower than last year.

“If we were in a struggling market, we would see this number higher as sellers accepted lower than normal prices,” he said. “There should not be any major downward price pressure, and it is likely that the current median sale price will remain relatively stable over the coming months.”

 

Source: YourInvestmentProperty

WA To Relax Coronavirus Number Restrictions – Home Opens Allowed

CommCollect

Great news for home opens

West Australian Premier Mark McGowan has announced an easing of gathering restrictions to allow for up to 10 people at once to be allowed to gather in one location.

This is a huge boost for the WA housing market, with the restrictions meaning home opens (and display villages) will be allowed to operate again from tomorrow.

The government has precautioned this, saying that it will be under strict health controls. The exact details of these controls are still yet to be fully understood.

WA has not recorded any new cases in the past 24 hours of the coronavirus, off the back of the one case reported yesterday related to the Costa Luminosa cruise ship (a 65-year-old West Australian Woman). South Australia has seen a similar slowdown and it’s anticipated it will follow closely in easing restrictions, but the exact details are again still yet to be determined.

Trying to anticipate exactly how the market will rebound is difficult, given this disaster has been under such unique circumstances. The most recent economic crisis didn’t greatly affect the housing market, with the effects of the Global Financial Crisis in 2008-2009 only being felt on a small scale in Australia.

It is anticipated that there have been a number of vendors who have put selling their home off due to these restrictions will likely enter the marketplace immediately. The WA government is suggesting that this may be the first step towards economic recovery for a state that has continued to hold a strong foothold in the resources market throughout the crisis.

 

Source: CommCollect

3 ways to pay off your mortgage faster

Paying off a mortgage is one of the primary financial goals many Australians have – if not the sole one.

A home is often a family’s largest asset, so paying off the mortgage is a big step towards financial freedom and living a comfortable retirement.

Unfortunately, it remains a massive task to accomplish – even with interest rates at their lowest levels in history.

So here are three tips for paying off your mortgage faster, so you can spend your hard-earned money on more important things!

Get a better rate

Even though interest rates are close to zero, many banks haven’t fully passed on these cuts. That’s why (if you haven’t already), you should pick up the phone today and ask Commonwealth Bank of Australia (ASX: CBA), or whichever bank you have your loan through, if you’re getting the lowest rate you can. Even shaving 0.2% off your mortgage rate can save you thousands of dollars over the lifespan of the loan.

Who would you rather have that extra dough – you, or your bank? Exactly!

Pay more than the minimum repayments

A principal-and-interest loan sees interest-dominated repayments required at the start of the loan, which taper over time as you pay off more of the principal. That’s why making extra repayments on top of the minimum amount required can dramatically shave off years (and interest charges) from your loan. It can also help protect you from the possibility of higher interest rates down the road.

If you’re in your first year of a 25-year mortgage, every extra $100 you pay is $100 you won’t pay interest on for 25 years. How’s that for a return?!

Invest alongside your loan

Many people save investing for when the mortgage is paid off, but there’s a better way to do it if you’re careful.

Say you have an interest rate of 2.5% on your mortgage. If you invest in an ASX dividend share that pays you 4% a year in dividends, you can use this extra passive income to help you make additional payments down the road, all whilst holding an income-producing asset.

Of course, this option isn’t for the faint of heart, as ASX investments can fluctuate wildly in value and some won’t always pay consistent dividends. But if used prudently, I think this is a path anyone with a mortgage can use to their advantage.

And if you’re looking for a good dividend share for this step, I would suggest taking a look at the free report below!

NEW: Expert names top dividend stock for 2020 (free report)

When our resident dividend expert Edward Vesely has a stock tip, it can pay to listen. After all, he’s the investing genius that runs Motley Fool Dividend Investor, the newsletter service that has picked huge winners like Dicker Data (+92%), SDI Limited (+53%) and National Storage (+35%).*

Edward has just named what he believes is the number one ASX dividend stock to buy for 2020.

This fully franked “under the radar” company is currently trading more than 24% below its all-time high and paying a 6.7% grossed up dividend

The name of this dividend dynamo and the full investment case is revealed in this brand new free report.

But you will have to hurry – history has shown it can pay dividends to get in early to some of Edward’s stock picks, and this dividend stock is already on the move.

Source:Fool.com.au

 

Perth: Surprising recovery for property market

A “surprisingly” quick recovery

FROM record lows in April, the Perth property market has made a “surprisingly” quick recovery according to Reiwa president Damian Collins.

“I think the market has ridden a rollercoaster wave of confidence,” he said.

“April had the lowest transactions on record.

“What’s interesting is how quickly, in the last week of April and coming into May, things have bounced back.

“It’s been surprisingly positive and it’s happened surprisingly quicker than we could have thought six or seven weeks ago.”

There were 527 sales in the week ending May 10, 32.7 per cent higher than the week before and just short of double the 264 sales recorded a four weeks ago.

The number of sales is on par with the same time last year and Mr Collins said while Perth was experiencing an “ordinary market” then, it was still a positive sign.

Another positive sign for ongoing improvement was stock levels, which were decreasing before COVID-19 and have continued to decline through April.

Mr Collins said the number of homes for sale and rent were at the lowest levels since 2014.

The number of Perth homes listed for sale on reiwa.com was 11,611 at the end of last week, 30 per cent lower than a year ago.

There were 5420 homes listed for rent, 23 per cent lower than 12 month ago.

“(Listings) are even lower than they were in February and early March when we were having a much better market,” Mr Collins said.

“Speaking to agents over the weekend it was pretty buoyant, there is activity, there’s just not enough properties around for lease or sale.”

Supporting the market’s rapid bounceback was pent-up demand, which has led to the decline in stock, the quick return to almost-normal life and Perth’s housing affordability.

“(Earlier this year) the demand was there, rents were starting to increase, prices were increasing and we were kicking off into a better market,” Mr Collins said.

“Then of course when COVID came it scared everybody; the headlines originally were we’re going to have 20 per cent unemployment, prices were going to drop X per cent and people got fearful.

“Now they’re realising that’s not going to happen.

“We’re not going to have that bad a market in WA, we’re not going to have that unemployment, even hospitality, we’re opening up cafes next week, albeit with only 20 people, but things are starting to get back to normal and it’s just giving people that confidence again.”

When it came to affordability Mr Collins said Perth prices were the lowest they have been since 2013.

“When you look at our affordability across the country we’re the most affordable capital city by a long way,” he said.

“Our (average) income is higher than pretty much every capital city, including Sydney and Melbourne, and yet our house prices are half of Sydney and about 30 per cent per cent lower than Melbourne.

“And the median price in Adelaide is about the same as Perth, yet our income on average is 25-30 per cent higher.

“There’s pent up demand, the oversupply has gone, people are looking at getting a loan for 2.29 per cent and they’re just thinking, maybe it’s not a bad time.”

Mr Collins said, compared to March, when WA went into lockdown and restrictions were imposed on the property market, there was now more confidence the market would hold its own.

“If we continue to have an economic recovery and the economy continues to go back to normal, certainly the market could hold,” he said.

“I think the risk that was looking significant on April 1 is probably not looking very significant at this stage.”

Source: PerthNow

 

Perth’s top 10 fastest-selling suburbs

REIWA has revealed Perth’s 10 fastest-selling suburbs for the 12 months to March 2020.

It took an average of 47 days to sell a property in the Greater Perth region, but some suburbs are bucking that trend.

Here are the suburbs people can’t wait to move into.

10. Willagee

Kicking off the top 10 fastest selling suburbs for houses in Perth is Willagee, 12km south of Perth and only a 10 minute drive to Fremantle and surrounding beaches. In the 12 months to March 2020 the median number of days to sell a house in Willagee was 26 days, which is 21 days faster than the Perth region. Willagee has a great community vibe which has gained popularity with young couples and families. The median house price in Willagee is $513,750, a 3.1 per cent decline on the same time last year. During the 12 months to March 2020, 100 houses sold in Willagee.

9. Kinross

Boasting an average of 25 days to sell is Kinross, which is a northern suburb of Perth, 26km from the Perth CBD. Kinross is favoured option among families looking to live somewhere with great schooling options, recreational facilities and parks. The median house price in Kinross is $465,000 which represents a 0.4 per cent decline on the same time last year. In the 12 months to March 2020 there were 84 houses sold in Kinross.

8. Joondanna

Also with a median selling time of 25 days is Joondanna. Situated just six kilometres from the Perth CBD, Joondanna’s median house price declined by 5.6 per cent in the 12 months to March 2020, which leaves the figure at $613,500. Joondanna’s prime location is the suburb’s major selling point, with close proximity to the city, freeways, public transport and schools. There were 58 houses sold in Joondanna during the 12 months to March 2020.

7. Doubleview

At number seven and with a median selling day of 25 days is Doubleview. In the year to March 2020 there were 142 house sales in Doubleview and its median house price experienced a 6.1 per cent decline taking the figure to $687,500. With stunning views of the Indian Ocean to the west and the Darling Ranges to the east, Doubleview is a suburb in high demand, especially for families wanting to put their kids into Churchlands Senior High School.

City views from Sydenham Rd and Ewen St in Doubleview.
City views from Sydenham Rd and Ewen St in Doubleview. Credit: News Corp Australia

6. Beldon

Located 20km north of Perth, houses in Beldon do not stay on the market for long, with its median selling time coming in at 25 days for the 12 months to March 2020. For a relatively small suburb it is popular among buyers seeking to live close to public transport, the beach, parks and shops. The median house price in Beldon increased 4.5 per cent to $465,000, making it a great choice for first home buyers and young families. During the 12 months to March 2020, 53 houses sold in Beldon.

5. Manning

Positioned seven kilometres from Perth’s CBD and in close proximity to Curtin University, Manning is in the enviable position of being close to major urban areas, while still removed enough to enjoy the benefits of a suburban lifestyle. Manning rounds out the top five fastest-selling suburbs with an average time of 23 days to sell a house. In the 12 months to March 2020, 54 houses sold in Manning.

4. Heathridge

With a median selling time of 23 days, Heathridge is Perth’s fourth-fastest selling suburb for houses. It’s median house price for the 12 months to March 2020 was $426,000 which is a 0.9 per cent decline when compared to the same time last year. Heathridge is a northern suburb of Perth 33km south of Yanchep located within the city of Joondalup. It’s close to the beach, public transport and Kwinana Freeway making it a desirable northern suburb to live if you want to be a little bit further away from the hustle and bustle of the city. During the 12 months to March 2020, 109 houses sold in Heathridge.

3. Carine

Carine is Perth’s third-fastest selling suburb according to its median selling time for the 12 months to March 2020 which was 22 days. There were 80 houses sold in Carine and the median house price decreased 2.4 per cent, taking the figure to $788,000. Carine is located 14km north of Perth CBD within the City of Stirling. Carine is well served by local transport, amenities and services which make it a popular suburb among buyers.

Carine Regional Open Space.
Carine Regional Open Space. Credit: Chris Kershaw Photographer/City of Stirling

2. Kingsley

Kingsley is a family-orientated suburb offering a selection of schools, parks and recreational facilities. The median time it takes to sell a house in Kingsley is 21 days, which is notably faster than the Perth region average. Kingsley is located approximately 20km north of Perth CBD and has a median house price of $555,000, which represents a 2.8 per cent increase in the 12 months to March 2020. During that time, there were 151 houses sold in Kingsley.

1. Shenton Park

Ranking number one as Perth’s fastest-selling suburb – for the second time in a row – is Shenton Park. The median time to sell your house in Shenton Park is just 20 days, 27 days quicker than the Perth average. Shenton Park is located in Perth’s prestigious Western Suburbs, close to the CBD, public transport and Shenton College. The median house price for Shenton Park is $1.126 million suggesting the suburb’s property value remains healthy with buyers seeking out houses in the higher end of the spectrum. Shenton Park’s median house price declined 1.9 per cent in the 12 months to March 2020, with 37 houses sold.

The fastest-selling suburbs.
The fastest-selling suburbs. Credit: Supplied

Source: PerthNow

 

Perth property post-COVID: How recent pain could prove our gain

It’s good news

WA property has sat at the bottom of its cycle for what feels like forever. Homeowners, trapped in negative equity, have listened with rising scepticism to real estate agents’ slightly desperate-sounding promises we had definitely hit rock bottom and the tide was about to turn.

In recent pre-pandemic months it actually seemed they were about to deliver on these predictions, with prices showing signs of life for the first time in years.

Then COVID-19 hit. National property news acquired horrorstruck tones and in late March, a prominent Perth developer struck a further note of foreboding.

Finbar announced the May launch and October construction start dates of its landmark Civic Heart towers in South Perth would be dumped, along with any other new launches.

It flagged “marked impact on confidence and sales activity on the Perth, national and global markets for some time” and “the likelihood of deferred decision-making by property customers”.

Developer Paul Blackburne says his projects, including as One Subiaco at the former pavilion markets site, are back to strong sales after a tough fortnight in April.

Flattened the curve

But with WA having flattened the curve, it seems the market’s formerly underwhelming position, plus a large slice of the population having little to do but sit at home planning ways to spend money, have combined to justify optimism.

Planning and property consulting firm Urbis keeps tabs on the city’s major projects, and director David Cresp said while social distancing had slowed down construction on some sites, it was in most cases still proceeding.

For projects already launched, pre-sales would continue to dictate construction start dates, and while getting presales had been more difficult, developers had a “business as usual” approach.

“Where you are seeing delays is projects that haven’t launched yet, and are choosing to delay a bit on the launching, because to launch a project means a lot of expenditure and effort that goes into marketing,” he said.

“Obviously all that is a bit less impactful in the current times.”

But given Perth’s challenging market, Mr Cresp said, many developers who had received planning approvals over the past year had been holding off on launches anyway.

Paul Blackburne, the developer behind the reimagining of the Subiaco Pavilion Markets site, said sales had flagged for a fortnight in April but had picked back up.

His company, Blackburne, had already sold 70 per cent of its Marina East-Ascot Waters development just completed this week, and had almost 100 people booked to view the remaining 19 apartments at this weekend’s opening.

Mr Blackburne said WA was the best place to be right now, being at the opposite end of the property cycle to Sydney and Melbourne.

Even with an expected price correction of around 10 per cent in Sydney and Melbourne, prices in those cities would remain almost double what they were 5-8 years ago.

The contrast

By contrast, Perth prices had doubled from 2003-2007, were now back at 2007 prices and were at the beginning of their upswing stage.

At worst, median price and rent increases over the past three months might drop over winter back to where they started three months ago.

But even this might not be across the board, given Perth’s residential ‘sub-markets’.

Mr Blackburne expected prices in outer suburbs to decline in the short term by 4 per cent, before a strong rebound and 6 per cent growth over the next year.

But elsewhere there was under-supply of large, well priced, high-end apartments, and he expected modest growth over winter.

Overall, he expected Perth property prices to increase 15 per cent over the next three years, with that growth to have started by spring across the city.

“For apartments in the western suburbs, with a limited supply and increasing demand from downsizing locals, we are increasing prices at the end of May,” he said.

Artist's render of The Sanctuary, Mount Pleasant. construction on which has been delayed but only by a couple of months.
Artist’s render of The Sanctuary, Mount Pleasant. construction on which has been delayed but only by a couple of months. CREDIT:DEVELOPWISE

Time to buy

“Our market is mostly wealthy baby boomers who understand market cycles and that now is the time to buy.”

DevelopWise, proponent of The Sanctuary in Mount Pleasant, is also catering to this market.

The luxury development was already more than 70 per cent sold when the pandemic hit and purchasers were mainly affluent local downsizers who hadn’t been financially adversely impacted, developer John Woon said.

COVID-19 restrictions had caused a couple of months’ delay to the scheduled construction start date of April, but that was all.

“We are pleased to advise that we have submitted for Sanctuary’s building permit last week and expect to receive approval sometime this month,” Mr Woon said.

“Our builder also assured us that materials are sourced locally and they do not foresee any major construction time delays.”

Source:BrisbaneTimes

 

Some relief for struggling Perth market

FOR those who were wanting to sell or buy, or have investment properties in the Perth region, a recent announcement brings good news.

The State government has reduced restrictions on the real estate sector to allow the number of people who can attend a home open to be increased from two people (including the agent) to a maximum of 10.

Real Estate Institute of WA (REIWA) president Damian Collins said with sales transactions sitting at a record low of less than 300 per week in Perth in recent weeks, this was positive news for the property market.

“There are many people who are still required to buy, sell or rent a property during the COVID-19 pandemic and this decision will help remove some of the limitations to viewing a property and will be a positive step in helping to increase transactions,” Mr Collins said.

Current social distancing and hygiene rules will still apply with real estate agents required to also maintain a register of people who attend each home open.

“While Western Australia seems to be passed the worst of the outbreak, we still take the current restrictions seriously and will be working closely with our members and the government to ensure that we do our part in helping to reduce the spread,” Mr Collins said.

“The cautious relaxation in restrictions, coupled with the announcement to provide rental assistance for those in financial stress, is most welcomed by REIWA and we hope this is the beginning of things starting to look up – not just for real estate but for the wider WA economy.”

The announcement also applies to viewing display homes and was welcomed by Housing Industry Australia (HIA) director Cath Hart.

“Display homes are the shopfront for home building but distancing requirements meant they have been closed other than by appointment,” Ms Hart said.

“This has meant very few new home building projects were initiated over the past month – in fact HIA’s weekly survey of WA display home traffic saw visitor numbers plummet by more than 90 per cent from about 2500 in early March to fewer than 50 last weekend.

“That will translate into a trough in WA’s residential building pipeline over the coming 12 months, so we’re also working on proposals to support the next stage of economic recovery.”

 

Source:FarmWeekly

Relieved Perth real estate agents plan home opens for this weekend

Perth real estate agents are breathing a sigh of relief after the West Australian government included WA government home opens and display village inspections involving up to 10 people among newly permitted gatherings.

In recent weeks, pre-booked private viewings with agents have been the only inspections allowed.

Chanel Majeks, a sales representative for Fremantle’s Dethridge Groves, said the agency had been using videos, videoconferencing appointments and private inspections and was perhaps better placed to do so than some other agents because it had always catered for a strong contingent of east coast buyers.

But while there had been a lot of activity showing people were accessing the online resources, this hadn’t translated into many bookings for private viewings, particularly for higher-end homes.

She said there was no underestimating the importance of people feeling comfortable to attend home opens, so the easing of restrictions was warmly welcomed.

“There is always going to be an emphasis on letting people look through, get a feel for the home,” she said.

“Like anything that’s a big investment you want to know there is a good sense of where the property is, in proximity to local restaurants and things like that, how light works in the home, even … the height of fence tops for example, or where the storage is.

“People will always want to see that for themselves.”

Ms Majeks planned to speak with vendors by mid-week to organise home opens for this weekend.

Her team would be making hand sanitiser available, staggering the number of people coming into the property, encouraging people to avoid touching anything at the properties, and of course not to attend if they had been unwell.

They had also eliminated handing brochures out, or asking people to manually enter details on the register of attendees (which the state requires). Instead agents would enter attendees’ details directly on to their tablets to avoid any physical contact. All brochures and contracts would be sent electronically.

Real Estate Institute of WA President Damian Collins said with sales transactions sitting at a record low of less than 300 per week in Perth in recent weeks, this was positive news.

“There are many people who are still required to buy, sell or rent a property during the COVID-19 pandemic and this decision will help remove some of the limitations to viewing a property and will be a positive step in helping to increase transactions,” Mr Collins said.

“While Western Australia seems to be past the worst of the outbreak, we still take the current restrictions seriously and will be working closely with our members and the government to ensure that we do our part in helping to reduce the spread.

“The cautious relaxation in restrictions coupled with the announcement to provide rental assistance for those in financial stress, is most welcomed by REIWA and we hope this is the beginning of things starting to look up – not just for real estate but for the wider WA economy.”

REIWA looked forward to working with the State Government on other initiatives over the coming months in relation to COVID-19 support, including the Commercial Code of Conduct.

Source: WAToday

Perth home sells in just 11 days as agents, vendors embrace tech innovation

A million-dollar Perth home has sold just 11 days after hitting the market in an incredible display of lockdown litheness as quick-thinking agents and tech innovation keep the nation’s real estate wheels turning.

The four-bedroom character home, in one of the city’s most sought-after pockets of Nedlands, sold for $1.24 million on March 28 via online bidding platform Openn Negotiation, with seven buyers battling it out for the Tareena Street abode.

Selling agent Thomas Jefferson Wedge, of Ray White Dalkeith, said the sheer volume of buyers, combined with the lightening-fast transaction time, was proof alone that the city’s property market was far from dead with buyers still willing to splash the cash, vendors quick to embrace new selling technology and agents dancing to a new business beat to keep all pistons firing.

4 Tareena Street, Nedlands
The home, in one of the city’s most sought-after pockets of Nedlands, sold for $1.24 million. Photo: Ray White Dalkeith

“People are always upsizing, downsizing and divorcing … and I think that the agents who want to succeed will be the ones that come out of this. They’ll be the ones who say, ‘I will deal with what’s coming’,” Mr Wedge said.

It was quick action in the face of coronavirus, coupled with using West Australian-born site Openn Negotiation, that Mr Wedge said sealed the fast deal at 4 Tareena Street.

“To be honest, the fact that Corona had come around quickly made many buyers hesitant, and in a normal market we would have seen even more buyers and bidders than we did … but my vendor [former West Australian Ballet executive director Louise Howden-Smith] was very motivated. She’s 77 years old and it was a massive house for her so she’s super excited,” he said.

4 Tareena Street, Nedlands
Using the West Australian-born site Openn Negotiation helped seal the deal at 4 Tareena Street, the agent said. Photo: Ray White Dalkeith

“I also think Openn Negotiation, in particular, is the right product for the right time – even outside of COVID-19 it’s so beneficial to get terms and conditions approved prior to auction.”

The desire to strike the perfect balance between auction and private treaty on an easy-to-use Ebay-esque platform spawned the somewhat fateful birth of Openn Negotiation three years ago, with site activity skyrocketing during the pandemic.

Openn Negotiation managing director Peter Gibbons said training for their digital sales method shot up 700 per cent in the past month alone, with March also setting a record for site uploads.

Auction livestream
Quick-thinking agents embrace tech innovation to keep the nation’s real estate wheels turning. Photo: Peter Rae

“We’ve been inundated … I think the real reason we seem to be gaining enormous traction is that we can operate online … and we’ve invested millions of dollars in technology to operate endlessly [on a digital platform],” Mr Gibbons said.

“It’s just crazy, no one likes to benefit from a bad situation, but we’ve always been steadfast that there should have been a push forward [in property-selling techniques].

“Auctions have been operating the same way since Jesus was a boy and it takes something like this to open people’s minds. I don’t think we can go back to the old way now.”

Mr Gibbons said Openn Negotiation delivered a highly palatable hybrid between private treaties and auctions that allowed buyers to bid from day one of the sales campaign.

Popularity for the transparent, online campaign has since spread like wildfire beyond Western Australia into urban and regional centres across the country as agents embrace a system that allows them to identify serious buyers, vendors to approve buyers with flexible terms and a licensed auctioneer on hand to oversee the final negotiation.

 

Source: Domain

 

Coronavirus is wreaking havoc on the economy, but house prices are holding up

Global markets have lost trillions of dollars, central bankers are rolling out extraordinary measures to stop the financial system collapsing, and even the usual safety net of gold is dropping like a stone. But one thing is holding up for now — the Australian property market.

“Business as usual this weekend,” crows an email from a real estate agent in Sydney’s inner west, which is offering virtual inspections and live-streamed auctions in a nod to social distancing.

“2020 ushers in new moderate growth cycles” is the title of this week’s letter to clients from an agency in Melbourne’s northern suburbs.

It lists low interest rates, a pick-up in demand from retirees looking for rental returns, and a weak dollar luring in offshore buyers, as reasons that real estate remains a “safe” and “capital preserving” option. In other words — safe as houses.

In past economic meltdowns Australian homes and apartments have fared well. In the last Australian recession, the one we had to have, home prices declined only around 4 per cent in 1990.

Property prices declined in only one of the five years following the financial crisis of 2008; going backward on an annual basis by 4.8 per cent in 2010, before rebounding 2.1 and 9.3 per cent in the following two years.

But past performance is no indicator of future returns.

CBA chief executive Matt Comyn talks to Elysse Morgan on The Business

The crisis that we find ourselves in is very different to previous shake-outs.

Commonwealth Bank boss Matt Comyn, who sits on top of a portfolio of the largest number of loans in the country, believes the coronavirus impact will be longer and harder than the only crisis many working Australians can fully remember.

“There’s every reason to be concerned at this particular point in time,” Comyn told ABC’s The Business. “The GFC was quite different and much more around failure in the financial system and a lack of trust, particularly between financial institutions.”

After the first initial shock, the wave of pain of the GFC was like a slow-moving tsunami. Many households and businesses were able to somewhat prepare, and to some extent economies continued to function, airlines continued to fly, hotels accepted guests, cruise liners left the docks.

But this time economic activity has been wiped out overnight across the globe.

Ratings agency Standard and Poor’s says the world is already in recession.

China, one of Australia’s biggest customers for goods, services and raw materials, has contracted so sharply it’s hard to comprehend. Factory output plunged 13.5 per cent even before the full shutdown, and retail sales fell 20 per cent

In Australia, the unemployment rate is set to shoot from 5 per cent to 7 per cent. And some believe that may be conservative given the scale of the shutdown.

It’s hard to know, as this is unlike any other economic crisis. It’s a health crisis.

The losses are immediate

Instead of brides scaling back the number of flowers for a wedding, having one photographer instead of two and choosing cheaper plonk for the table, weddings have been cancelled en masse.

During the GFC theatres struggled but remained open, offering discounted tickets. Not this time. Social media is littered with artists, singers, actors out of work.

Stephanie, a Sydney make-up artist reliant on weddings and some theatre work, now has zero income. From an average $6,000 a month to nothing, overnight.

She isn’t spending at cafes, make-up stores, bars, she cancelled an Airbnb weekend away on the NSW South Coast, and forget about new clothes. She estimates she has savings that will cover food, rent and bills for three months.

Will weddings be back on the minute coronavirus is deemed “under control”? No. Will theatres have money to pay for extras like make-up artists once they reopen? No.

Stephanie is already considering selling her car and is looking to move back in with her parents. Her landlords will have an empty flat.

Stephanie is just one element of the wedding; think of the florists, the suppliers to the florists, the flower growers, the caterers, the wait staff, the marquee suppliers — nearly all small businesses with zero bookings over the next three months at least.

The indefinite standing-down of 20,000 Qantas staff this week shows it is not just casual workers reliant on events who are being devastated by the shutdowns.

Tim, a maintenance worker in Brisbane, has two toddlers, a mortgage and only two weeks of annual leave to cover the likely couple of months he will be sitting at home. The airline has said many of its employees will have to take leave without pay.

Tim’s mortgage isn’t going to go away, so any non-essential spending, at pubs, cafés, getting the pool pump fixed, has been shelved. The holiday up Queensland’s Sunshine Coast in June is off.

A pilot, James, believes he will see a 50 per cent reduction in work, which means an almost 50 per cent reduction in money landing in his account.

The scars won’t fade quickly

The consequences of the outbreak will be long and deep, because despite promises that “things will return to normal” the scars of losing income overnight will not fade quickly from the consumers’ mind.

Household war chests, the money saved for a “rainy day”, will be depleted if not run out across the country. And it is unlikely Government stimulus hand-outs or RBA-backed business loans will prevent that.

Clearance rates at auctions have been running hot, along with prices in most capital cities over the past couple of months as buyers confident in their jobs and buoyed by ever-lower interest rates threw up the paddle.

The Reserve Bank made an emergency cut to the cash rate this week, taking it to 0.25 per cent, and banks are passing it on in different forms. While past rate cuts have lit a fire under buyers’ enthusiasm, perhaps this last cut may cause buyers to wonder — are they really going to be safe as houses this time?

 

Source: ABC.net.au