There’s no doubt that the global economy is in strife and that a recession looks to be inevitable. this will impact many self-funded retirees. Over the past month there’s been a stop on business activities in many industries including pubs, restaurants and travel. For the real estate industry, there’s been considerable changes, including public auction bans and issues surrounding property inspections. According to the Real Estate Institute of Australia, public open for inspections and auctions had to immediately stop to abide by the social distancing rules that have been set in place by the Australian Government in response to COVID-19.
Open houses are so important for prospective buyers. But the way that Australians like to view homes has completely changed in light of the current pandemic. Due to COVID-19, real estate agents have had to become clever and innovative in the way that they deliver open houses. Real-time virtual open tours are now giving people the opportunity to see properties live. Even though private house inspections are still possible, there’s a bit more to it than once before. This is a result of social distancing restrictions in place. Houses need to be thoroughly cleaned by agencies before inspections take place and coordinating inspection times certainly presents new challenges. The federal government’s social distancing rules need to take place and hand sanitiser is a must-have at inspections.
People are no longer gathering on the footpaths of properties or in auction rooms. But, public auctions can still go ahead. Mr Kelly, the president of the Real Estate Institute of Australia said that “With regard to public auctions, these can still occur via telephone bidding or by using one of the many online auction platforms available.”
However, there’s been a mass cancellation of houses going to auction with approximately 40% of Australia’s real estate auctions withdrawn over the last weekend of March.
While March still showed small growth in the real estate market, the early signs of decline are now showing. This is in response to increasing unemployment rates and consequently defaults on mortgages.
In the Westpac Weekly, the Westpac bank spoke about their analysis of the economy, saying that “Using this analysis we estimate that there will be 814k in job losses in the June quarter lifting the unemployment rate to 11.1%.” They’re predicting a slow recovery in the September quarter, and a bounce back in the December quarter with predictions of an increase in employment rates of 350,000 jobs. If Australia enters a recession with high unemployment rates, the real estate market will take an impact.
The Reserve Bank of Australia offered a $90 billion lending facility to banks last week for small businesses. They also reduced the cash rate to 0.25%, which they say won’t increase until employment rates are back on track. But this probably won’t be enough to save the housing market as Australia moves towards a recession in response to the novel coronavirus.
With cuts to the cash rate, lenders would typically be jumping on investing in the property market. But one must factor in that much of the world is in lockdowns and social distancing is bringing about the unforeseen closure of businesses, as well as high unemployment rates. There’s much uncertainty out there, and the housing market’s going to be negatively affected. According to CoreLogic, “As the coronavirus pandemic broadens, and the probability of an Australian recession increases, consumer confidence is trending lower from an already weak position. This will likely weigh on high-commitment consumer spending decisions, such as buying or selling a home.”
Many retirees still have a mortgage on their home. Many self-funded retirees rely on the share market and rental income to survive. With the stock market crashing and the agreement of a 6-month moratorium on evictions, retiree investments are going to be hard hit. Especially those retirees relying on rental income. These self-funded retirees can’t rely on the additional government payments such as the aged pension. This may force some retirees to sell at a low, or it could force some retirees to re-enter the workforce.
The real estate market’s looking to hurt for the rest of 2020 as a result of a pullback from buyers/ investors. There’s hope in the future though. The global pandemic may send the Australian economy into a sharp recession, affecting the real estate market. Looking at the information put forward from experts, the economy will recover once business starts to return to normal. Recovery will move faster with travel bans lifting in the future too.
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