Investors – Be Confident
In times of upheaval, it’s easy to make rash decisions – especially when it comes to investment properties, and especially with the current grim predictions some people are making about the property market. As there are as many opinions on the future of the property market as there are houses, some investors are beginning to feel nervous.
While it can be tempting to give in to panic, the truth is that most investors don’t need to make any moves just yet, and they certainly don’t need to stress. Love & Co looks at why confidence will be key in the property market going forward.
Risky Living?
The truth is that the long-term effects of the coronavirus on the economy in general are unknown – but we can look at some past examples to determine what is likely to happen. In the 1987 stock market crash, house prices actually went up as people looked for a solid investment to put their money into while other stocks declined in value.
Australia has many of the building blocks in place for a solid future in the property market.
- Interest rates are hitting all-time lows, encouraging investors
- First Home Buyers are still showing a strong presence
- Immigration is strong, which will only increase as borders are opened and Australia is seen as a safe haven after the impacts of the coronavirus
- In most capital cities, homes are in relatively short supply, keeping prices stable.
All these factors make for a stable property market that will withstand the inevitable short-term economic disruptions.
Thinking long term
Most people hold off on making major financial commitments in times of uncertainty, so it’s not surprising that the property market might slow down – at least in the short term. Prices could fall, but it’s important not to see those numbers and begin to panic. In any financial situation, making a rash decision based on short term data is unwise.
The founder of Real Wealth Australia Helen Collier-Kogtevs agrees.
“This potential recession, unlike others, could happen quickly due to the speed at which the world is reacting to the virus and causing us to shut down. I believe that we have about six months of ‘crazy’ before things start to settle down. And as quickly as markets fall, they will rise. Long term, good quality property always present solid returns,” she told Investment Property Magazine.
While this stage in history is monumental, it’s also only temporary. There is sure to be some economic fallout for years to come, but at this stage it appears that Australia has weathered the storm very well. As the economy begins reapproaching something resembling normalcy, investors that have held on will begin to see the rewards again, while those who scrambled as a reaction to the circumstances could end up with regret.
Michael Yardney, director of Metropole Property Strategist says that people could even end up looking back on 2020 as a great buying year for property, once the first impact has died down. Historically, property has been a good investment in times of upheaval, and with the strong foundational factors in place, there’s no reason to suggest this time should be any different.
Keeping things stable
One of the key factors to determining stability is going to be unemployment rates. As unemployment rises, house prices are likely to fall. But of course, it’s important to look at the bigger picture.
It’s natural for unemployment figures to go up as a result of the coronavirus’s impact on the economy, just as it’s natural that reduced inspections and increased uncertainty will slow the market down. Those reactions are to be expected. The real concern is if the instability goes on for a sustained period of time.
However, currently there doesn’t seem to be any reason to believe that it will. Australia’s economic measures and relief packages were designed to keep people in their homes, which reduced the likelihood of people needing to sell or vacate. In turn, while the property market might outwardly appear to stall, over the long term these measures should help to keep it stable.
Confident Investors
All signs point to an eventual full economic recovery for Australia. Taking advantage of the temporary nature of the market’s decline, record low interest rates, and other nervy investors off-loading property and temporarily driving down prices, acting with confidence is key to withstanding these times.
For better or for worse, we’ll come through the other side of these unprecedented events in time. Whether or not you come through with investments intact will be largely down to how much confidence you are willing to show.