We trust you are remaining healthy and safe during these difficult times. Our team will still be open for business during this time whilst we work remotely. We’d like to give you some insight into some of the great questions our clients and business partners have been asking our team over the last week:
Q1) What does Binnari Property think will happen to the property market over the coming months?
Whilst we can’t predict with any certainty what will happen over the coming months as the situation is so fluid, a lot of what will happen to prices in the coming months depends on the key drivers for the individual property markets and unemployment rates.
We anticipate fewer properties coming onto the market as people sit tight and subject to there not being a significant change in available supply from forced sellers, we’d expect values to remain relatively stable. The lack of buyers in the market is currently being countered by the lack of quality stock available. You can also expect to see reasonable price corrections for investor grade product in over supplied locations.
Q2) With all the uncertainty in the world right now, shouldn’t I wait until the dust settles before investing into property?
This depends on your individual circumstances. Some buyers would be better keeping their cash available to meet personal expenses during the current period, whilst others with access to surplus cash for investment could take advantage of opportunities. As with any uncertainty in the employment markets, the impacts will be felt differently across different industries. Those in travel related industries will be feeling the strain, whilst other industries could see an uplift during these times – think healthcare and toilet paper manufacturers!
The opportunity for investors is their ability to access the very best quality owner occupier properties, which might become difficult to purchase for reasonable prices once normal conditions return and buyers hit the market – refer to Q6 below. Locking in the right property now, will set up an investor for the long term.
Q3) Am I going to be able to find a tenant in the current market?
As long as you select the right type of property i.e. an owner occupier property in limited supply, then the indications from the property managers we’ve interviewed are that the rental markets are holding up well, with limited new supply hitting the market and some potential buyers deciding to rent. At the end of the day, people still need to live somewhere.
That said, should we see a significant rise in unemployment, then this would no doubt impact the rental market. Binnari Property is working with our property partners to provide rental guarantees to ensure certainty for our investors.
Q4) Are there any bargains to take advantage of during this current climate?
It really depends. At this stage, quality owner occupier product is holding up well from a value perspective especially with limited supply and increased demand from those in a strong cash position. There is currently an opportunity to negotiate favourable terms such as a reduced deposit or a rental guarantee.
The Binnari Property team will monitor the values of quality owner occupier properties across the country and should values begin to fall, we’ll ensure our investors are in pole position to take advantage of this.
Q5) If I’m convinced the market will fall in the short term, should I cash out now and reinvest once the market falls?
Whilst this could potentially be a good strategy, one thing to consider is the high transactional costs of selling and repurchasing property. Once you take into account agent fees, potential capital gains tax, stamp duty and solicitors fees, the benefits of flipping can often be eroded. Additionally, property has historically proven to be an attractive investment in times of stock market volatility and low interest rates, so the cost of re-purchasing into the property market might not make this strategy viable.
Q6) What’s Binnari Property’s prediction post Covid-19 for the property market?
When we see conditions return to a pre Covid-19 landscape, we feel pretty confident that property will perform well due to the below:
- Record low interest rates– with interest rates at historic lows, property becomes accessible to more potential buyers and investors. Those wishing to diversify away from the volatility of shares, can access a growth asset with an income/yield well above the cash rates.
- Serious under-supply– many property markets that were already under-supplied due to the 2019 federal election, Royal Commission and the tightening of the lending environment in 2018/2019, will be under further pressure once conditions returns to normal
- Government stimulus– post Covid-19, it’s extremely likely the Federal Government will be providing significant stimulus to activate the whole economy. This is likely to include incentives to drive the property industry, as the construction and real estate industries employ millions of Australians (directly and indirectly) as well as providing significant income for State Governments through taxes i.e. stamp duty
The team at Binnari Property remain committed to helping our investors and our business partners navigate their way through the current property climate, whilst identifying unique investment opportunities that will be presented. As with any property market, the better quality owner occupier type properties in limited supply will always outperform oversupplied investor grade properties.
If you would like to arrange a free video chat or phone call to discuss how you could potentially take advantage as a property investor during this period, then please get in touch.
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