Property investor planning for the future

Perth Property Market Predictions Beyond COVID-19

The ongoing Coronavirus pandemic is a challenge many of us have never seen nor experienced in our lifetimes, bringing with it a sense of uncertainty, concern and an ache for returning to a sense of normality. This is particularly prudent for the property market, with the industry already feeling the effects of COVID-19.

Whilst we wish we had a crystal ball for predicting the future of property in Australia and specifically WA, multiple news sources have revealed some encouraging Perth property market predictions beyond COVID-19 to give us all hope amidst these relatively unchartered waters.

 

Property Is An Essential Item

Whilst current market uncertainty around the Coronavirus is expected to drive down Australian property prices, there is confidence that the property market will avoid a major collapse due to housing being classified as an essential consumption good according to Eliza Owen (Head of Australian Research at CoreLogic).

In a recent media release from property hub realestate.com.au, Ms Owens addressed the notion that property is less volatile than other markets (such as the share market) simply because it is a consumption good and not deemed a liquid asset. She went on further to comment on the potential market recovery by explaining;

“Transactions could drop but I don’t think we will see a broadbased, major fall in prices … there will be some areas where job losses are higher and there’s more downward pressure on prices. It’s still unclear.” – Eliza Owen

Share prices vs property prices in Australia

Source: CoreLogic

 

Australia’s Resilient Property Market

Real estate has always led the rebound of our economy in times of financial crisis, including Australia’s recession in 1991 and the Global Financial Crisis (GFC) where 8 out of 8 capital cities produced property price growth during each downturn. A recent CoreLogic article also explained the fundamentals and trends of how property has performed against negative economic shocks, while deep diving into the idiosyncrasies of a pandemic-led downturn.

It gives us quiet confidence of a Perth property market prediction of resilience and buoyancy beyond COVID-19 since the real estate markets were able to emerge from the ashes after Black Monday in 1987, the credit squeeze of 2017-2019 and of course the GFC in 2008.

Whilst there is still uncertainty around the duration of the pandemic, and how quickly the economy will rebound, Smart Property Investment stated in their recent article that “…the real estate sector will be right at the top of priorities – it always is”.

It is expected the real estate industry could bounce back quickly beyond the pandemic because it is yet to be forced into a full shutdown (and is likely to remain this way), plus the cost of borrowing has also never been lower.

 

Our Growing Support From Natural Resources

Further optimism for the property market can be seen from this news release from Energy Magazine which outlined in its March 2020 edition of Resources and Energy Quarterly (REQ) that Australia’s resources and energy exports are projected to total $299 billion during the 2019/20 period despite ongoing uncertainty around world trade. Within this sizeable projection of economic stability, iron ore was tipped to be the first Australian commodity to top $100 billion in export earnings in a single year.

Further to this, Australia was also tipped to overcome China to become the world’s largest producer of gold by 2021 – further signs of encouragement for the Australian economy thanks to our resource-rich continent. Demand for iron ore from China is also growing at positive rates with BHP having an optimistic view towards the recovering Chinese market after reporting strong production results in its first quarter of 2020 operations.

 

Iron Ore mine in Australia


There Is Still Demand For Property

A recent news article entitled What Will Australia’s Recovery Look Like uncovered some of the initial data we are seeing from the private sector, giving us valuable insight into current factors that will ultimately dictate the resilience of our economy. This included a growing unemployment rate, reductions in discretionary spending and signs of the property market slowing.

However, an interesting take away from the article was that the buy section on popular property website realestate.com.au is up 14 % compared to April 2019, indicating that there is still ongoing demand for property, as people look for a change of scenery whilst having more time on their hands to browse popular property sites.

 

A Short, Sharp Recession Is Predicted

Property experts are still tipping a notable impact on Australian property given property values declined by 7.5% between February 2008 and January 2009 following the GFC, and a national recession is to be expected. However, the positive news is the length of time this recession is predicted to be, is short, sharp and not particularly sweet.

Property expert Michael Yardney recently published a positive outlook for Australia’s economy where chief economists have predicted a short recession following the impact of COVID-19, with signs of an economic recovery by as soon as 2021. As seen in the chart below shared from Michael’s Facebook post, it shows the property market fluctuations dating back to the 80’s recession, with encouraging future projections beyond the pandemic.

Recession projections in Australian property

Source: Michael Yardney

Senior vice-president and chief investment officer of La Trobe Financial Chris Andrews was also recently quoted in speaking out about the potential sharp recovery of the Australian property market beyond COVID-19. He attributes the active restrictions around in-person auctions, home opens and general human interaction to creating a majority of the slowing in the current property market, and predicts that once these restrictions are lifted, he is confident of a sharp rebound for the industry.

“Everything is pointing to there being an incredibly sharp drop-off in economic activity which is no surprise to all of us who are now living various modes of self-isolation. As soon as the disease progression allows, for this reason, it is a reasonable base case to assume that the eventual rebound, as we see some positivity around developments in the coronavirus, will be strong, and sharp as well.” – Chris Andrews (La Trobe Financial).

 

Planning For The Future Is Key

The Perth property market has historically fared well against negative economic shocks. One of the major lessons we have learnt from previous downturns is the importance of taking a long-term perspective. By focusing on longer term planning based on historical behaviour, expert advice, Government assistance and of course following the developments around the global pandemic, you can avoid knee jerk reactions in a highly dynamic marketplace, whilst setting yourself up for the future.

With Paradiso Como due for completion in the same year as the predicted market recovery highlighted above, now is a great time to consider the next steps in growing your future property portfolio! If you’re considering taking advantage of the current situation, our latest blog article highlights the benefits of future planning and the advantages of buying off the plan within these times of uncertainty.

If you’re interested in discussing a future investment into the boutique riverside Paradiso Apartments in Como, we welcome you to contact us today to hear about our buyer and investor incentives.

Call 0435 450 955 Now