6 Reasons to Stay Positive
Residential real estate appears to be entering a period of hibernation at least until life begins to return to normal. We don’t expect to see widespread price falls that were seen post the GFC despite a short-term spike in unemployment. We anticipate a fall in real estate listing numbers and transactions (listing numbers are currently very low and will remain so throughout May, June and July).
Many of our clients have decided to hold back the sale of their home until the worst of this crisis is over. With the freezing of mortgage repayments (for up to six months) and historic levels of stimulus on offer we can’t see any immediate external pressure resulting in ‘forced sales’, regardless of people’s current employment situation. We believe buyer’s waiting around for bargain prices will be in for a rude shock. There may be, on a small-scale, owners who need to sell at a discount (to established value), but we don’t see widespread downward pressure on house prices. Speaking to many colleagues in the industry encouraging results are still being achieved for quality inner city homes and apartments due to an extreme shortage of stock for buyers.
Here are our top 6 reasons to be positive:
1. Affordability – Brisbane’s affordability compared to our Southern neighbours is at an all-time high. No one is arguing that Brisbane’s medium price should be equal to Sydney or Melbourne. However, history has shown that once the differential gets out of hilt buyers quickly head North. Our market had not seen the same level of growth the Southern markets have been enjoying. Remember the lesson of ‘The Tortoise and the Hare’? Slow and steady wins the race. Maybe the real estate equivalent is valuer Herron Todd White’s description of Brisbane as “unexciting and safe”, a “modest but positive performer.” This value proposition in Brisbane properties continues to boost interstate migration, its attractiveness to expats and investors will help shield our market.
2. Government Stimulus – The Federal government has acted swiftly to inject stimulus into the economy unleashing a record A$130 billion ($80 billion) jobs-rescue plan, pledging to subsidize workers’ wages. Shielding employment losses is a positive move for the residential property market. Given the property sector contributes to 1 in 4 wages in Australia (according to Property Institute of Australia) we would love to see further stimulus to help fire up the property market in the second half of 2020 including expanded first home owner grants or stamp duty concessions for those young Australians entering the market.
3. Interest Rates – The RBA has cut interest rates once again to help provide a buffer to the current short-term impacts of the COVID-19 volatility globally, improving housing affordability and stimulating investment. Once this crisis passes, we will have the cheapest and most liquid availability of mortgages we have ever seen. In addition to this the banks have come to the table putting the interests of their customers first with measures such as mortgage payment deferrals and low interest loans for small business owners;
4. Infrastructure Spending – Brisbane’s economy is about be turbocharged as Queensland’s largest building projects get underway, including Queen’s Wharf and Cross River Rail. This is a once in a generation level of infrastructure investment taking place in our city which will drive employment and migration. As Brisbane matures into a world class city property prices will benefit.
5. Low Aus Dollar – Demand for property historically increases in Australia when our dollar weakens in response to global financial instability, which in effect increases the attractiveness of Australian property from an international perspective. Expats always use the low Aussie dollar cycle to snap up prime housing assets in anticipation of their inevitable rise or returning home with their family to educate their children in our first class education system.
6. Medical Investment – Many sectors are facing really tough times but there will be others that experience growth. Quite obviously, employment in health services will grow in the short-term, but longer-term, there is likely to be increased investment in medical research, hospitals and medical centres. Government employment will also grow; employment in Department of Health and the Australian Taxation Office will increase immediately.
Where does this leave the Brisbane market? It will take some time to regain the positive momentum we started 2020 with. Of course, transaction numbers are declining significantly, which is not a surprise. This is starving the market of quality offerings. There are many buyers who need to purchase for a variety of reasons (upgrading, downsizing, job relocation, expanding families). We believe despite the negativity amongst some groups, there are many elements at play to help shield the residential market. We look forward to assisting our clients with their property needs.
