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According to the Property Investment Professionals of Australia (PIPA), housing markets around the nation are “well placed” to withstand the economic fallout of the COVID-19 pandemic and won’t see a dramatic drop in values.
PIPA chairman Peter Koulizos stated that the various financial support programs, including government stimulus packages, would work to prevent any significant changes to the housing market over the medium term.
Additionally, Mr Koulizos stated that many Australian markets were experiencing strong conditions prior to the outbreak of COVID-19, which would “help insulate” them over the coming months, and he expects housing prices won’t be as significantly affected as some may have previously predicted.
“Whenever there is a global financial shock, some commentators predict huge property price falls, which ultimately don’t happen,” Mr Koulizos said.
“During the GFC, prices were ‘forecast’ to fall by 30 per cent, but in many locations they held their ground and even strengthened over the months and years afterwards.
“While the coronavirus situation is somewhat different, given it’s a temporary public health emergency, I believe property prices may temporarily soften by 5 to 10 per cent at most but rebound relatively quickly.”
The combination of low interest rates, low inflation and the unprecedented move for lenders to defer mortgage payments for mortgagors affected by the crisis will all work to further protect the property market, according to PIPA.
“Unemployment will go up – there’s no doubt about that – which is a similarity with other economic downturns,” Mr Koulizos said.
“But low interest rates will help property owners as well as business owners.
“Plus, there is the fact that you can defer your mortgage repayments for up to six months, which hasn’t happened before in my lifetime,” he said.
According to Mr Koulizos, rental markets may not be able to hold strong to the same degree as the sales market.
He noted that the drop in demand for short-term holiday lets and Airbnbs could put a squeeze on rental markets, as these empty properties flock to the private rental scene. However, he also stated this damage could also be offset by strong initial conditions in the rental market and low interest rates.
“Again, rental markets were in good shape prior to the pandemic, but there has been a significant number of holiday-related listings come on to the market over recent weeks, which is likely to continue for some time yet,” he said.
“So, rents will trend lower due to this extra supply, which will drag down median rents until those leases are finished and domestic tourism is reopened.”
According to Mr Koulizos, property investors are in a “good position”, even if rents go down, due to lower interest rates and mortgage deferrals throughout the COVID-19 period.
“It is far better for this to happen now with most sales and rental markets in healthy shape before the crisis began,” he said.
“Coupled with once in a lifetime interest rates, property owners are well placed to ride out any temporary downturn. Prices aren’t going to go up or down by 30 per cent.
“There may be a slight downturn in prices over the short term, but real estate is a long-term investment that has historically shown resilience time and time again.”
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