Coronavirus – property disaster or buying opportunity? | PROPERTY INSIDERS with Dr. Andrew Wilson
Mar 16, 2020
There are a lot of scary headlines at the moment.
All of the anxiety in the air can even make an optimistic person a little nervous.
In today’s episode, I want to bring some perspective to the frightening headlines by explaining some of my thoughts on the current situation.
Then, I’ll be talking to Dr. Andrew Wilson, who’s also been around for a while and has seen and experienced things like this before.
By the end of the episode, I hope you’ll be a little less scared, and also have some facts to work with.
Remember, most of the things we worry about actually never happen.
Seven reasons why I’m confident in our property markets despite the coronavirus scare
What’s ahead for our property markets in light of the coronavirus issues?
Are they going to crash like the stock market has?
Is Australia going to fall into recession?
That’s a question on the mind of many investors in light of the economic woes around the world and the uncertainty surrounding the coronavirus.
Now I'm not downplaying the potential medical issues related to the coronavirus.
In fact, I've looked up the definition of a "pandemic" and this definitely is a "pandemic" even though our health authorities are not prepared to call it one.
Clearly many Australians will come in contact with the virus over the next couple of months, some people will suffer cold and flu-like symptoms while other more frail members of the community will succumb to the germ.
And that is tragic.
At the same time, many businesses will suffer, particularly those in hospitality, tourism, education and those whose supply chain from South East Asia will be affected.
But based on my perspective having been involved in property for over 47 years, while this issue will have an effect on our economy and a short-term impact on our property markets because consumers will become less confident and sit on the sidelines waiting for things to become clear, I believe that a year from now, and in particular five years from now. and most certainly in 10 years from now, this pandemic will have had no influence on where the Australian property market will end up and the value of your and my home at that time.
But this is the first global crisis we're experiencing in the social media age and we've learned that:
- Information spreads fast and
- False or sensational information spreads faster.
So, remember these wise words...
As Warren Buffet said: "Be fearful when others are greedy and be greedy when others are fearful."
Homebuyers and long-term investors who have a secure job and income and pre-approved finance should take advantage of any short term downturn in our property markets to set themselves up for the next phase of the property cycle.
As I said, I'm comfortable with the underlying fundamentals supporting our property markets int the medium to long term.
Let’s look at a couple of them…
- Population growth
Australia’s population is growing by around 360,000 people per annum, meaning we need to build around 170 to 180,000 new dwellings each year to accommodate all the new households.
- Declining housing supply
The oversupply of dwellings in many Australian locations is now dwindling and there are very few new large projects on the drawing board.
Considering how long it takes to build new estates or large apartment complexes, we're going to experience an undersupply of well-located properties in our capital cities in the next year or two.
- Interest rates are low and will go down further
The prevailing low-interest-rate environment is making it easier to own a home, either as an owner-occupier or investor.
- Smaller households are becoming the norm
Pretty soon Millennials will make up one-third of the property market and their households tend, in general, to be smaller as are the households of the booming 65+ year old demographic.
More one and two people households mean that moving forward, we will need more dwellings for the same number of people.
- More renters
Soon 40% of our population will be renters, partly because of affordability issues but also because of lifestyle choices.
- First home buyers are back
First home buyers are back with a vengeance, in part thanks to the government’s new scheme to encourage them, but also because of cheap finance and rising property values.
As opposed to established homebuyers who have a “trade-in” that is increasing in value, if first home buyers wait to get into the market they're finding the market moving faster than they can save, so they’re hopping on board the property train as quickly as they can.
- The underlying fundamentals are strong
Sure our economy is facing challenges, and the share market is volatile, but our property markets are underpinned by the fact that 70% of property owners are homeowners who are there for the long term.
They're not going to sell up their homes - they'd rather eat dog food than give up their homes.
And Australia’s banking system is strong, stable and sound.
Property Insiders With Dr. Andrew Wilson
In the short term, the virus might affect the property market, but in the long term, it most likely won’t affect the value of property in Australia.
Some history:
In the past 40 years in the share market, there have been 12 corrections of 10% or more.
There have been 8 corrections of 20% or more.
We’ve had 5 recessions.
But property over the last 40 years has been much more resilient and stable.
That’s because property is based on the provision of a good we all need – shelter
Yes, business confidence and consumer confidence may be down for the next little while.
If we can get a sustained recovery in the share market, that will be the first step to recovering confidence.
There will be a decrease in travel and tourism, but that will probably be offset to some extent by government action.
We still need to look at the fundamentals.
There is plenty of upside in recovery. Housing prices are still below where they were three years ago in Sydney and Melbourne.
We still have the lowest interest rates on record and there’s probably another cut coming as part of the government’s stimulus package. This will only make property more affordable.
Plus, there’s still a surge in first home buyers.
There are still a lot of positives for the housing market, and there’s reason to be hopeful that this current situation won’t be a significant issue within months.
The bottom line:
The wise King Solomon had an inscription inside his ring that said, “This too shall pass.”
This was so that he would not become too confident during the good times or too despondent during the bad times.
The coronavirus outbreak has spooked markets across the world and there is no doubt that it will have a significant global economic impact.
However, like all the other worldwide epidemics we’ve experienced this too shall pass.
At his inaugural address in 1930, Franklin D Roosevelt said: "There is nothing to fear but fear itself."
Wise words indeed.
Links and Resources:
Metropole Property Strategists
Dr. Andrew Wilson, chief economist of MyHousingMarket.com.au
Join us at Wealth Retreat 2020 on the Gold Coast Click here for details
Show notes plus more here: Coronavirus – property disaster or buying opportunity? | PROPERTY INSIDERS with Dr. Andrew Wilson
Some of our favourite quotes from the show:
“I don’t make 30-year investment decisions – and that’s what your investment should be long term – based on the last 30 minutes of news or so.” – Michael Yardney
“Just because we do have a recession in technical terms, doesn’t mean that people are going to lose their houses.” – Michael Yardney
“You’ll never regret taking a vacation, engaging in a new hobby, or spending a day with those who make you happy.” – Michael Yardney
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