A new global crisis to infect property

Well our fabulous though dangerous year is continuing on as it started. On top of the natural disasters, we experienced the sharpest share market dip in history last week.

Economists sited the spread of the coronavirus as one of the causes of the dip, although some also noted investors were becoming skittish as the share market had reached historical peaks in February 2020.
We're over it though
In Australia, this week (2-8 March 2020) we've already moved on from that news – we bounce back quickly here particularly as the GFC taught us all that what goes down will usually go back up, though it's anyone's guess as to when a share market recovery will take hold.

The biggest issue we're dealing with this week is the strange and unprecedented run on grocery market staples. You would think there's a pandemic coming or something.

Interestingly, just like the property market, the grocery frenzy is very suburb specific.  In some areas, toilet paper will just not stay on the shelves while in other areas the buying patterns have not changed at all.

Property market impacts?
This leads to the question of the impact the share market and a potentially B.A.D. flu season will have on the property market.

Referencing the GFC again, it's reasonable to expect downward price pressure at the higher end of the property market – that is, properties $2,500,000 and above. Of course, this will also mean some opportunities for bargains depending on the duration of the share market downturn.

For the other end of the property market - $1,000,000 or less – expect to see 7% plus rises in the main centres as forecast at the start of the year. Why? A few reasons . .
* the potentially regrettable RBA decision to drop rates this month by 0.25% resulting in more sugar for the property market - hopefully this will eventually flow through to retail and services

* the government will want to see funds continuing to flow into the economy and will ensure lending remains accessible to the broader population

* investors will increasingly turn away from the share market and direct their funds towards the property market

* the population predictions have not changed, so housing demand continues to outpace supply year on year

* both Federal and State governments have committed to extensive infrastructure works

* the recovery activity (if they ever get funds out into the impacted communities) in bushfire and flood affected areas will provide stimulus in pockets of the economy – we're already experiencing difficulties accessing trades . . .again.
Be warned though, some areas and suburbs will be negatively impacted by recent events.  For example, suburbs dependent upon mining and major tourism areas will struggle.  Once again, good performance for both capital growth and yield / rental returns will be dependent upon selecting areas with healthy growth drivers.

In times of uncertainty we also see the gold in selecting positive or at least neutrally geared properties.  This approach is the ultimate insurance because if your worst case scenario unfolds and you lose your job, a positively geared property will continue to look after itself until you can get back on your feet.

The revised forecast
I recently had the opportunity to speak with real estate industry rock star, Tom Panos, to obtain his views on the market forecast as we head into the busier buying months.

Tom's views are summarised in the latest issue of the Property Portfolio Magazine along with tips for how to make the most of the current market, advice on compiling your finance team, accessing funds and buying overseas. Read the latest edition here.
Author: Debra Beck-Mewing

Debra Beck-Mewing is the Founder and CEO of The Property Frontline.  She has more than 20 years' experience in property investing, Australia-wide and has used a range of strategies to build her property portfolio including renovating, granny flats, sub-division and development. Debra is skilled in identifying development opportunities, and sourcing properties that have multiple uses and multiple exit strategies.  She is a Qualified Property Investment Advisor, licensed real estate agent and also holds a Bachelor of Commerce and Master of Business. As a passionate advocate for increasing transparency in the property and wealth industries, Debra is a popular speaker on these topics.  She is also an author, podcast host, Editor in Chief of Property Portfolio Magazine and participates on numerous committees including the Property Owners' Association.

Follow us on facebook.com/ThePropertyFrontline for regular updates, or book in for a strategy session to discuss your property questions.

Disclaimer – This information is of a general nature only and does not constitute professional advice.  We strongly recommend you seek your own professional advice in relation to your particular circumstances.

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