Short term impacts of COVID-19
- Lock-down laws are impacting real estate sales. Open houses are banned.
- Many auctions have been cancelled. Public and onsite auctions are banned.
- Apartment buildings have closed their facilities, such as pools and gyms. Some apartments have elevator restrictions (e.g. no more than 2 people or 1 family in an elevator at the same time.)
- Some tenants are asking for rent relief, despite a government scheme to assist tenants: See Courier Mail
- Some tenants are not renewing leases or going month-to-month.
- Vacation rentals are sitting empty.
- One property manager has cancelled all leases (probably illegally) - This property manager rents from property owners and then rents out to short term guests. The landlords' rent has gone to zero.
- Holiday and short term rental apartments are entering the long term rental market, at discount prices: Courier Mail
- Some real estate agent's are misleading the market, saying things are good. For example, "there are still buyers out there wanting to buy" (but not saying at low prices), "real estate will become highly sought-after as we move forward", "property is still the safest haven to have your money in", "there are still positive things happening for buyers and landlords".
Longer term impacts of COVID-19
One agent says:
"Like most industries, it is not hard to foresee a coming downturn in the property market. The closure of businesses, loss of employment, reduced hours, rental defaults plus the myriad of other inter-linked factors will have negative flow on impacts."
In my opinion:
- Negative gearing will be seen for what it is -- making a loss. In times of crisis, people understand the risk even more. Going forward, investors will be less likely to take on the risk of negatively gearing investment properties. So prices will fall.
- One bedroom apartments and apartments with no balconies will be less popular. Owners and tenants will realise living in (and not leaving) such apartments for a long time is not enjoyable. The virus or similar will come back again.
- Large over-crowded apartment buildings with less elevator capacity will be less popular. Some buildings have now implemented "two people only" rules for elevators. Being in a large Meriton building, on level 50, with no balcony, and crowded elevators, with 12 small apartments per floor, does not look appealing.
- Apartments with balconies and views will be more appealing.
- Older people are likely to die. This may create a surge of supply, especially in areas where older people live.
- There will be less foreign students, and so less renters for city apartments.
- There will be less foreign buyers.
- Australian beach resorts will become more popular, helping beach vacation rentals. International and cruise vacations will become less popular.
- People are earning less, eating into savings (which were possible deposits), less likely to change jobs or move place of residence and be more risk adverse. Prices (values) will decrease and stay flat for a while.
- Off the plan apartment sales will drop off.
- Renters will choose higher quality apartments over smaller apartments designed for foreign students.