With the continuing threat of the Coronavirus outbreak causing panic in countries throughout the world, it is important to consider what is the likely impact of coronavirus on Brisbane Property Values. We have had a number of people contact us asking what our thoughts are on this topic.
We first published our response to this question on March 12 2020, and at that time it was too uncertain to assess the impact that was likely to occur in the months that followed. Since then we know that the response in Queensland has been exceptional. Let’s look at what has unfolded and where we might be heading.
The presence of coronavirus in Australia, and around the world, is causing a significant slow down in the economy.
However, in Australia, the combined effect of monetary and fiscal policy has helped all of us navigate this difficult period.
Impact of Coronavirus on Brisbane Property Values
In terms of the impact of coronavirus on Brisbane property, it is important to note that the fundamentals for Brisbane real estate have not changed at all.
We still have a huge supply shortage, driven by lower listing volumes as well as a reduction in construction completions.
In fact disruption to consumer confidence caused by the presence of coronavirus has resulted in some new attached dwelling projects to be delayed in Brisbane. This will result in a further reduction in the supply of new dwellings in the coming months and years.
Remember, before Brisbane Covid-19 concerns became a part of our every day lives, the rate of interstate migration was accelerating. More and more people were relocating to the Great South East which was supporting the strong population growth that our region was experiencing.
With border closures, this trend has paused.
But it is expected that with normal movement recommencing between states, that more and more people will look to migrate to our City, driven by affordability, sunshine and other lifestyle drivers.
Demand for property is still stronger than ever. On the ground we have seen no slow down in terms of the number of people at open homes, the number of registered bidders at auctions or the number of offers on properties listed for sale by private treaty. Across the board we are still seeing extremely high demand for quality properties in well located pockets within Brisbane.
Additionally, Australia is not one property market. There are markets within Markets and the Brisbane Property Market is actually quite different right now to the other major cities of Sydney and Melbourne.
According to Corelogic Data, the median house prices at the end of July 2020 for the largest capital cities in Australia are listed below:
- Brisbane = $502,000
- Sydney = $866,000
- Melbourne = $678,000
Sydney is 72% higher than Brisbane and Melbourne’s median value is 35% higher than Brisbane.
The average income in Brisbane is $2,231 per week compared with $2,867 in Sydney (28% higher) and $2,413 in Melbourne (8% higher) (ABS).
The proportion of household debt to incomes is therefore a lot greater in Sydney and Melbourne, than it is in Brisbane which provides strong support for our local market during the economic downturn as homeowners are in a much stronger position to be able to afford to meet the repayments on their loans.
The economy is, however, being supported through interest rate cuts and the federal government’s $17.6 billion economic stimulus package. Due to Australia’s prudent economic management in recent years, we are now in a very strong position to support the economy with the necessary stimulus to help us through the months ahead.
With the Federal Government’s ongoing intention to support jobs, incomes, small business and investment, our national economy should be OK in this time of uncertainty. We will come out the other side!
These factors can work to ensure the demand for property remains strong and robust. Lower interest rates provide more disposable income to the household sector that can be used for spending to boost the overall economic benefits.
They also increase the borrowing capacity of buyers providing a further stimulus for people looking to enter the market. Remember there are many people who have NOT been impacted by the pandemic. These people have access to finance that has NEVER been cheaper. It is these people that are underpinning the Brisbane Property Market.
The property market, especially residential property, is quite different to other markets (such as the sharemarket) because it is not dominated by investors.
It makes up approximately $6.2 Trillion worth of Australia’s Wealth being the largest asset class in our country behind Australian Superannuation at $2.7 Trillion and Australian Listed Stocks at $1.8 Trillion.
Approximately 65-70% of all residential property is occupied by home owners and we as Australian’s will cut out spending in a lot of other areas before we make the decision to sell our much-loved family homes.
Of course, the main purpose of residential property is to provide shelter, and this is a human necessity. Because of the high transaction costs, we do not buy and sell property quickly (like shares) and therefore as an asset class it is less likely to experience price fluctuations in short periods of time.
Whilst this is a serious matter, it is important to remember that illnesses like influenza cause 3,500 deaths, about 18,000 hospitalizations and 300,000 GP consultations every year .
In relation to Coronavirus, according to the Australian Government Department of Health, as at 18th August 2020 Australia has 23,559 confirmed cases including 421 deaths .
Remember the effect of the virus will come to an end at some point.
Just like SARS (2002-3) and swine flu (2009-10), it is expected that the Coronovirus will come and go within a relatively short period of time.
According to the RBA deputy governor Guy Debelle, “Once we get beyond the effect of the virus, Australia’s economy would be supported by the low level of interest rates, the pick up in mining investment, infrastructure spending and an anticipated recovery in residential construction.” So there is no need to panic, instead taking a common sense long term approach seems like a more logical approach.
The Brisbane market has been strong up until March when coronavirus started to impact our lives. The fundamentals have not changed, so it is important to keep this all in context. We got through the Global Financial Crisis – the biggest economic downturn in modern history – so we can get through this.
For professional assistance with navigating through these tough times, we are here to help.
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