In this scenario, it is helpful to look back at how previous financial crises have impacted on the property market and real estate investing in Australia (although earlier shocks to the system have not involved a health pandemic, so we are somewhat in uncharted waters).
It is important to remember that in most instances, the housing market has generally responded positively to national and even global setbacks. Although property is susceptible to rapid falls in demand, it does nevertheless tend to be less volatile than the share market. It is also the case that the property market in Australia is very diverse, and so can be influenced by a variety of local factors, meaning that house prices can rise and fall in different states and cities at different rates.
In short, falls in the share market and even recession do not necessarily foreshadow long term falls in the value of property in Australia, as the graph below from Core Logic would seem to indicate.
Early indications on the impact of coronavirus on property investment
We are still in the relatively early stages of the pandemic, and so the effects of the health crisis on the property market are at present largely unknown. It does seem that investors are proceeding with caution, especially given the growing job insecurity, as the increasing lockdown impacts on household wealth.
At the same time, it should also be borne in mind that borrowing costs are at record low levels, and financial institutions are still continuing to lend (for the time being, at least). The economic stimulus should also prove to be a boost to the economy, and it is expected that this will have a positive impact on the property market. On the other hand, even if those industry figures who are predicting significant falls in house prices are right, this could be regarded as a potential opportunity for investors.
At the present moment, the situation is changing daily, and it is impossible to predict the outcome — who could have imagined at the start of 2020 that we would be where we are today, for instance?
What is more clear, however, is that if you are serious about growing a property portfolio and investing in your future, fear, hesitation or delay could lead to you potentially missing out on some prime opportunities, as developers are currently offering incentives that make investing in property at this moment in time more attractive than ever.
Is now really the right time to invest in property?
“Be fearful when others are greedy and greedy when others are fearful” – Warren Buffett
Despite the overall sense of uncertainty and in some cases panic that have gripped sections of the media and the wider community, it is important to keep the risks in perspective and remember that the housing market and economy in general will begin to recover once the pandemic abates.
This is likely to be accompanied by a surge in demand which, while it will reflect growing confidence, will also mean that some of the highly favourable investment conditions that exist currently may no longer be available, or offer the same value.
Therefore, if you have been considering investing in property in Australia, the best advice is not to change your plans. Alternatively, if you haven’t previously been thinking about an investment property or growing your property portfolio, this may well be the ideal time to start.
As has been consistently shown, the timing of when you invest in property is not as important as the length of time you hold the asset, and purchasing at this stage of the cycle has the potential to result in a cashflow neutral or cashflow positive property (i.e., an investment property that pays you a monthly income over and above holding costs).
Take this opportunity to begin real estate investing
At Power of Property, we are in the position of being able to offer some unique opportunities for our clients.
5 year 5% rental guarantee in south-east Queensland
An ideal investment opportunity currently available are boutique freehold lots in a development of 43. At 450 m2, blocks of this size are hard to find in the current market, and almost non-existent at this price point in this part of the country (currently priced at $80,000 less than competing land in the area).
What makes this development particularly attractive, aside from its location in one of the best performing areas of SE Queensland, is that it is cash funded and already under construction, reducing any off-the-plan sales risk.
The developer is also offering a fixed price guarantee on these packages, so that if the price changes, they will give you the house for free. They are also offering a Best Value Guarantee, meaning that if you are able to find better value, they will match it and give you $10,000. Furthermore, all homes are of steel construction and come with a 25 year structural warranty (as opposed to a 6-year warranty, which is the case with wooden frame homes).
As a further incentive, the project is also being offered with a 5 year 5% rental guarantee. This means there is no anxiety about having to find tenants for the first five years, as you are guaranteed a return.
Similarly, for most investors, this will likely be a cash-positive investment. For instance, if you have an annual salary of 90K and an investment loan at a rate of 3.7%, this will mean you earn $50 per week after all taxes and expenses have been paid from your investment property.
Book a free Zoom online information session today
At Power of Property, we are experienced property strategists who are dedicated to helping you achieve your property goals.
During this time of social distancing and social isolation, we are still available and are happy to arrange free online strategy sessions via Zoom teleconferencing.