COVID-19 and the pathway forward for property

OPINION:

What a rollercoaster this has been for us all. The last two months have rocked the world on many levels and we are still navigating our way out of both the health crisis and the subsequent financial crisis. There is a lot of uncertainty and many are fearful of what the future holds. Businesses are shutting down and many of those will not reopen, unemployment rates have doubled almost overnight, and some are predicting unemployment to reach levels anywhere from 15-20%, depending on who you listen to. 

So that raises a valid point - who should you listen to? And even in ‘normal’ times, who is best placed to assist you on your property journey and how do we get through this without too many battle scars? Is all this just doom and gloom or is there a silver lining on the horizon that we just can’t see yet? 

The effects on individuals and businesses alike have been devastating. Companies, such as Virgin Australia, entering voluntary administration in the space of just a handful of weeks would have been unthinkable back in January. But is this a ‘shake-up’ of society that we needed in one way or another? Has this had an effect on the way we look at our work lives and our personal lives?

Over the last few weeks, I have had dozens of meetings with new and existing people about exactly these points. It’s interesting to listen to investors’ fears and concerns at the moment; some are worried about their incomes, some about the market crashing and some are deeply concerned about their ability to retire in the next few years. 

The general consensus I've found is that overall there is an underlying level of optimism which is encouraging to see and hear.  However, for the next little while, the overwhelming uncertainty surrounding both the health risks and the financial risks are going to weigh on people’s minds just as much as on our healthcare resources and the economy. 

Australian residential property, in general, has performed well over the last decade or so following on from the global financial crisis, and we have achieved significant growth in most capital city markets. Changes to APRA requirements have allowed banks to take a slightly more relaxed approach to lending, and of course, interest rates have dropped to drastically record lows.

For me, I see a perfect storm of opportunity right now, enabling savvy investors to take advantage of low-interest rates and market uncertainty. With many buyers and sellers sitting on the sidelines this is a great time to be buying property and building your asset base. 

We have experienced this before. In 2000 we had the tech bubble, in 2001 we had the September 11 attacks in the USA, and since then we have had to deal with SARS, MERS, the Global Financial Crisis, Ebola and now COVID-19. History has shown that Australian property prices have been temporarily and only mildly affected before making a solid comeback in the following years. Each time these end game scenarios occurred, commentators were out in force saying ‘this time it's different’. Maybe at the time, it was difficult to see how we would make it through to the other side, and just maybe, the same thing is playing out again in front of our eyes all over again. 

Long-term property investors understand that market conditions are always going to change and that external factors are simply a part of investing. Investing for the long term is almost guaranteed to involve periods of uncertainty and being outside of your comfort zone, but of course, this goes back to the old saying ‘if it were easy everyone would be doing it’. Now is as good a time as any to refocus on your long term goals and what you really want out of life. 

I saw a post on social media recently that summarises our current scenario succinctly:

“Traffic has gone, fuel is affordable, bills extended, kids are at home with their families, parents are at home taking care of their children, fast food has been replaced with home cooked meals, hectic schedules replaced by naps, rest and relaxation. The air seems cleaner. The world, quieter. People are conscious about health and hygiene. Money doesn’t make the world go around anymore. Doctors and nurses are being praised instead of athletes and celebrities. And collectively, we now have time to finally stop and breathe”. 

Our long-term goals do not change because of these external factors; nor should they. 

This short-term health crisis has most certainly had a massive impact on the economy and, while governments at both state and federal levels have responded swiftly, there is likely going to be a debt hangover for some time to come. 

Regardless of these external factors, I encourage you to look to the future and navigate your way through these difficult times. Find your own pathway forward. Team up with experts who have the experience to guide you and don’t be afraid to ask for help. Use this time to think about what is truly important in life and link that to the opportunities that will present themselves in the months and years ahead. Sitting on the sidelines and waiting for the perfect time to buy certainly won’t move you any closer to achieving your goals. 

Our financial markets and property markets will recover, and things will return to normal – even though we are likely facing a ‘new’ normal that neither you nor I have any direct control over. Stay positive and don’t let the noise get in the way – it could cost you your financial future.