The first quarter of 2020 has proven to be one of the most challenging periods most Australians have faced. It does not matter what your agenda, political, financial or social. The impact dealt by COVID-19 was and still is quite insidiously surreal. The state of play is changing each day rapidly as our understanding grows.
Valuers have noticed a slowdown in market activity, the volume of transactions has fallen as has people seeking to refinance mortgages. Generally, the market levels are holding, but a drop in property price of up to 10% has occurred in some locations, and in secondary locations, larger falls have also occurred. However, due to the low level of evidence, this change can not be noted with a strong level of confidence. A significant challenge for Valuers are the risks associated with inspecting properties, and the ramifications attached to their professional indemnity insurance - which more or less have been ironed out by the Australian Property Institute and discussions with key government stakeholders. Some property valuers have had to take pay cuts, and or asked to take leave or stood down to prop up the company's bottom line. It also appears that real estate agents and property managers have had to do the same. Sadly, this is not unique to the property industry. In some cases, out of work pilots have been trying their luck in logistics as truck drivers and Uber drivers.
Of course, not all sectors or parts of sectors are affected, some of the traditional essential services have thrived, particularly if you're in retail as highlighted by Coles sales jumping by almost 13 per cent to $9.2 billion in the March quarter, while many retail stores have closed, e.g. hospitality and apparel. Property markets have been affected by physical distancing and uncertainty, which has contributed to the low levels of transactions. A lot has happened off the market. Built-up demand in March has diminished and to some extent has supply in April. In this market, if we had the normal supply of stock, we would have seen a more measurable decline. What happens when circumstances improve, and some of the restrictions are lifted?
The government is likely to stop the stimulus packages and mandated protection to the vulnerable parts of the economy. People will slowly resume working, and so confidence will return to the market, but we do not expect market conditions to be as it was before the virus.
We expect that taxes will have to increase to pay for the government's handouts, which will dampen growth. On the other hand, relief at the improvements in living circumstances will bolster confidence. In the interim #stayathome & #staysafe
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