COVID-19 and What to Expect in Australia’s Property Market
Hi, Ben Kingsley here, Managing Director of
Empower Wealth and I want to give you a quick update in terms of what’s happening in the
property market right now. Now we all know that we’ve been impacted currently and also
our future movements will be impacted by the Coronavirus.
But what’s interesting is actually happening in the property market right now. Now it is
subject to change, but we did see over the course of the weekend some pretty good numbers
and still lots of competition. I want to take a little more of a deep dive in terms of where
I see the property market now. And then we’ll do more of that in the upcoming podcast, The
Property Couch, which will be available later this week. But my first message is really around the
economic story here and what’s actually happening. So number one, we need to understand that
this is a supply side driven correction. All right? Now what that basically means is
that human beings, mobility of humans are being shut down. When you shut that down,
we can’t turn up to work and we can’t make goods. And then there’s obviously impacts
in terms of the supply chain, upstream and downstream. That’s what happened in China
and that’s basically what’s going to happen through the disruption that we see here in
Australia. And we’re obviously seeing that in Europe and America as time goes by as well.
So we take a deep breath and we understand that this is a temporary thing. It’s not necessarily
something that’s going to go on forever. We start to understand what’s happening.
And that’s why most economists also believe that this will be more likely a V-shape recovery
than a long protracted recovery, which is what you normally get when it’s demand led.
Because what happens in the demand led correction and slow down is, there’s just no impetus
and confidence in the economy and everything just trickles to a hole. It’ll need a stimulus
program to get back into track. In this particular case, it’s a V-shape
discovery because it is really a shock in terms of the supply side. We can’t all turn
up to work safely and happily go about our duties. We’re going to get this impact in
terms of mobility and movement and that’s that big shock that we’re getting. But on
the fact that we’ve also got stimulus happening around the world, monetary policy changing
and everything gearing up, once we do have mobility, in other words, once we have confidence
that our health is going to be okay, then we are most likely going to see a very strong
level of activity and mobility and the economy will increase significantly.
So what does that mean for the property market? Well, if we take a really long-term look,
if I was looking at the next decade in Australia, our superpower is really our population story.
We’ve got birth population coming through, we’ve got really high immigration coming through
and that is really our economic superpower to drive the economy forward. But also, it’s
the big story around property demand and supply and construction and all the things that keep
our economy moving strongly. Hence, the next 10 years is looking fabulous because once
you get past this point of inertia and concern and uncertainty, Australia looks like a great
place to live. Safe, secure, good governance and relatively low debt levels. It’s a good
place to basically come and have a prosperous future. And so we’ll expect that to continue
over the course of the next decade. But what happens in these types of uncertain times
is people start to change behaviors and act a little bit irrationally. ie. the toilet
paper. But we definitely know there will be some
drop off on the demand side. And that drop off is going to come from people
who have job uncertainty and income uncertainty. So it’s unwise for those people to be taking
advantage of the current marketplace. When we have a situation like we do today,
where we have uncertainty, uncertainty is a fabulous, fabulous chance for opportunity
in regards to investing. We like uncertain times, smart investors like
uncertain times because that gives us an opportunity to get into the market at what we might consider
the dip or fair value. So if we had say 10 buyers for every property at the moment and
we’re losing five of those buyers, the marketplace will still be fairly resilient.
Make no mistake though. People will still have some concerns and there
will be a crisis of confidence for some buyers, but the smart money and the smart investor
will see through that and we’ll look longer term rather than shorter term. And that is
my message to you. All the evidence suggests that any pandemic
will have a peak and then a slowdown. We’re already starting to see people in China moving
back to their regular operations and so forth. Now, it is still a serious health threat,
so I don’t want to underplay this, but if we do see us moving through that and we do
see a strong recovery, then we’re probably still going to see property prices in positive
territory in 12 months time. If we see it prolonged, then I’m tipping that the property
market will remain flat and that’s on the basis that we already had really strong demand
in the marketplace. So… what’s next then?
It’s up to you to work out whether you’re in a good position to act now or whether you
want to cool the jets because of income. Don’t cool the jets because it’s what everybody
else is doing. That’s a fatal investment mistake. That’s a rookie error.
If you’re in a good financial position, you’ve got good job security, then you know that
your competition is dropping off. It’s a great time to get active and start buying. Now,
if you want to talk about that with one of our buyer’s agents or property investment
advisors, you can click on the link below which will take you to the book a free appointment
page. That’s important for you. Now for all of those people who may have job
uncertainty, I also have one final message for you. You know we have a free MyWealth
Portal and on that I want you to still do your finances. It’s absolutely important in
these uncertain times for you, Cash is King and your financial story is king. So I want
you to also click on the other link down there to get the book. This book here, Make Money
Simple Again, is the instruction manual for setting up your MyWealth Portal and setting
up your Money SMARTS on the MyWealth Portal. There’s also some tutorial videos available
for you to download. Don’t wait because guess what?
If you do wait, there are people who are actually putting this off. So you don’t want to be
one of those people that in the end, when everyone goes, “Now, it is safe.” and there’ll
be a flood of demand coming back into the marketplace. We all know, if there’s strong
demand and low supply property prices are going to go higher. So short term, yes, this
a health issue. But it is temporary. It will pass. And I leave you with this final message.
You’re investing not for the next one year, not for the next two years, but your investment,
whether it be owner, occupier or investment is for the long-term. If you’re investing,
you are investing for the longterm. You are not speculating.
So when we think about what might happen to property prices over the next one or two years,
just remember this… less competition, better buying. And if you think about the long-term
returns, they are powerful and they are life changing in terms of your financial transformation
journey. But I want to leave you with one statistic
which is really powerful in terms of what has actually happened in one particular market.
So we’ve got Valuer General data back from 1974 through to the end of 2019. This is all
the data collected from the land transfer office, collated and corrected. Now across
Metropolitan Melbourne, we’ve seen since 1974, the median house price was $25,500. We have
then seen in 2019, the median house price is $704,900. Now that in percentage terms
is a 2664% increase over that 45 year period. That is a 7.7% capital growth compounding
return year on year. Add to that, the rental income that you would
be getting on that property and that’s financial transformation.
That is my message for you. Think long-term. Don’t get caught up in the inertia and in
the uncertainty. And stay the course. We are definitely here to help you as our valued
customer. Remember on Thursday we’ll be talking in more
detail about the opportunity in the current property market on The Property Couch podcast,
of which you will also get a link to in our Friday morning newsletter. So there will be
more updates as required. But just remember, this is an interesting
opportunity for those of you who have the capacity to move forward and to fast track
that movement. Or secondly, if we’re not quite sure, it’s also a time to get onto the MyWealth
Portal and tidy up our finances. Thanks for watching.