After a wild summer we thought we were finally out of the woods but coronavirus has coughed up one hell of a curveball.
Causing everything from dramatic stock fluctuations to a nation-wide TP crisis, how does this impact the property market?
The way the share market has reacted over the last week—with record fluctuations—reflects a broader uncertainty in the community. These types of fluctuations are exacerbated by automated bidding systems which share traders use, and as such are not reflective of the way in which the housing market reacts to the same news.
The likelihood is that we are in for a short-term economic hit if the virus impacts a larger proportion of the population (as expected). If this remains a short-term shock, which is what economists are predicting and all of us are hoping, the unemployment rate should not be affected. With strong unemployment figures and fundamentally sound business conditions supported by record low interest rates, the housing market should prove resilient.
The housing market increased 1.7% in Sydney during February and is now up 10.9% for the year. On top of that, the most recent weekend registered an auction clearance rate of over 80%, which is indicative of a market on the rise. This type of momentum will be difficult to slow, even with the possibility of a short term economic slow-down.
The government has yet to announce its economic stimulus in response to COVID-19, but it has identified that it will be focusing the flow of funds towards supporting workers, particularly those who aren’t entitled to sick leave, and to support small business to ensure that employers are able to maintain wages to staff. This too should help buffer against a downturn.
There are signs that China is already returning to normal, with the rate of infection plateauing. China has aggressive growth targets for its economy, and it will be ramping things up at a great speed to ensure that they get back on track. Once this happens, Australia will be a major beneficiary as we export raw materials which support China’s growth. During the GFC, Australia benefited from this very occurrence—which is one of the main reasons why our economy grew during that period. All things considered, it’s looking like the market issue to worry about most is which supermarket has enough 3-ply to go around.