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.
I’m not downplaying the potential medical issues related to the coronavirus.
Many Australians will come in contact with the virus over the next couple of months and many businesses will suffer, particularly those in hospitality, tourism, education and those who supply chain from South East Asia will be affected.
But the biggest effect will be the slashing of business and consumer confidence.
While we may not have a pandemic yet according to the authorities but we do have an “infodemic” with the media, including social media scaring us and panicking many people into buying toilet paper, bottled water which even those buying it don’t seem to know why they are even doing it.
Of course, I don’t really know, and nobody does.
I believe in a year from now, and in particular five years from now, and most certainly in 10 years from now, this pandemic (if we can call it that yet?) will have had NO influence on where the Australian property market will end up at that time. The value of your home, my home and your investment portfolio will be in a similar financial position with or without the impact that a virus could make.
So from a property perspective a virus that will affect our economy for 6 weeks or 6 months will come and go in a relatively short time frame.
These are all seem like relevant comparisons however not enough is known about COVID-19 to really compare at this early stage and I am not playing down that this may be more serious than viruses in the past, nor am I playing down the impact it will have on specific business’s but people still need to live somewhere, investors still need to put their money somewhere, and in the history of Australian property market there has never been any major drops in property prices which have not been isolated to specific areas or cities.
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.
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.
The prevailing low interest rate environment is making it easier to own a home, either as an owner occupier or investor.
In fact it’s never been cheaper for investors to own a property with the “net outlay” – the out-of-pocket expenses – being the lowest they’ve been for decades considering how cheap finance is today.
Lots of people live in multigenerational household, but Millennials households tend, in general and this generation will be making up a bigger percentage of households moving forward therefore more dwellings required for the same number of people.
Also it is predicted that by 2030 over 40% of our population will be renters.
Governments are not building houses to accommodate this increase so that means more investors are required or current investors need to buy / build more.
Around 80% - 85% of the property market are owner occupiers so when the chips are down very few, if any people actually sell their homes. Unlike the stock market which is 100% investors – if investors lose confidence in the economy then the stock market is the quickest and easiest thing to sell.
Property is much more stable than the stock market as it is 85% made up of homeowners and even investors are simply unable to quickly sell all their property.
Whatever you think of the banker sector, the Australia’s banking system is one of the strongest and most stable in the world.
There is currently a very low rate of mortgage default of mortgage to increase.
Property is the only investment market not dominated by investors.
However like all the other worldwide epidemics we’ve experienced this too shall pass.
Franklin D Roosevelt said: “There is nothing to fear but fear itself.”
Warren Buffet said: “Be fearful when others are greedy and be greedy when others are fearful.”