In just a few months, changes brought on by the Coronavirus outbreak have already affected the Australian property market. Public auctions and open homes were recently banned as part of the Federal Government’s effort to restrict the spread of COVID-19.
Out of 3,203 properties scheduled for auction across Australia’s capital cities, about 40% were pulled from the market following the announcement of the ban. In late March, more than 800 homes, or 57.5%, of Melbourne’s 1,404 scheduled auctions were withdrawn. The same situation occurred in Sydney where 51.8% of 1,061 auctions did not push through.
While some withdrawn properties may move to private treaty sales, others will likely be extracted entirely until the market becomes stable again.
What does this mean for buyers?
Active homebuyers are recommended to close deals before the economy worsens. However, we expect prospective buyers who are still at the researching stage will likely take a break from inspecting homes due to travel and social distancing restrictions.
Soaring unemployment rates have also caused consumer confidence levels to drop. Would-be buyers have to reconsider any previous offers and be extra cautious in applying for loans at this period.
As the pandemic worsens, prices are likely to fall and transactions and listings to slow down. Economists predict that if unemployment rises to 10%, prices could drop by as much as 20%. As a result of the current auction bans, prices are projected to crash in the inner suburbs of Melbourne and Sydney, where the auction format is most popular.
In the past trends such as those listed above have turned the market around, giving would-be buyers more power given the increased affordability of properties. They can also take advantage of the current situation to practice greater negotiating power.
Will it still make sense to sell?
A change in strategy will likely be required for vendors, especially those whose properties are already on the market.
Reduced activity in the property market will mostly affect vendors who don’t have the luxury of time. Some might need a quick sale because they already bought a new property or have to move out due to urgent personal reasons, including divorce or job relocations.
To make a sale in the current economic climate requires innovative solutions and a reset in expectations. Many real estate agents have resorted to virtual auctions and inspections to accommodate potential buyers. Private inspections are still allowed as long as social distancing protocols are followed. Agents have also been providing hand sanitisers and establishing strict guidelines preventing buyers to touch anything inside the property.
As the number of buyers is expected to decline, so is the number of sellers. Choices will become limited and so will competition. While we can anticipate more changes to the property market in the coming days, buying and selling will continue.