Issue 10 | April 16th, 2020 | How is April Shaping up?
Hi, Andrew Bell here with you again. I trust you made the best of the most unusual Easter break.
What was really noticeable here was the mood. Our city, and I would think beyond our city, people have moved through three stages over the past three weeks. The first stage was the shock and horror of the rapid application of restrictions and the realisation that something was happening in our own backyard. We saw huge numbers of redundancies with the likes of 20,000 Myer employees, 6,500 at The Star Casino, and the news coverage of massive queues at Centrelink. As contagion rates and deaths started to increase, people were in a high degree of shock and fear.
The following week was the $130B JobKeeper program announcement and it seemed to give people an element of hope that things would not be as bad as it had appeared the week before. There was less news on the economic front and as we saw how devastating the COVID-19 situation was in places like New York, London and other countries there was a sense that we were in a much better position than most.
Last week and over Easter, it appeared that there was an acceptance that this is now the life we have for some time to come, and, as Australians do, they tended to make the best of it and get on with life. People seemed to have been able to adjust and a little bit of good humour started to surface. It was even wonderful to hear the news on Tuesday that there were zero new cases of COVID-19 identified over the 4-day Easter break here in Queensland.
In the midst of all of this, it is no surprise that a massive number of clients are reaching out for more and more information about how the effects of the economic shutdown will show up in the real estate market.
In summary, the impact on real estate at the moment is that supply and demand is in a very balanced situation. There has been no flood of new properties coming on the market for sale. In fact, it appears that most people have been so distracted by all that is happening in our world of restrictions that they haven’t particularly paid a lot of attention to listing property for sale. Across the Ray White Group, which is of course the largest real estate group in Australasia, new listings have been declining for a couple of weeks. So, there has been no immediate rush of properties coming on the market for sale and stock is tightening in volume numbers. On the reverse, there remains a sizable number of people who want to buy. They have adapted very quickly to the new restrictions around inspecting properties.
A couple of examples: last Thursday we conducted a private auction where only our staff were present receiving and conveying bids to the auctioneer on behalf of the bidders, and in that we had a property go to auction where we had five bidders on the property. On Easter Saturday, a commercial property at Bundaberg was sold unconditionally by two on our commercial team to a person who never inspected the property physically but was very comfortable buying it off a comprehensive video of the property. Again, over the weekend, we conducted private inspections of another property we had for sale over a 1.5-hour period and spacing out each of the buyer inspections by 10 to 15 minutes. We had some 8 inspections and the property subsequently sold. These are examples of how people have quickly adapted, but also about the degree of interest in people buying at present.
One of the key indicators in determining the direction of the real estate market is to watch supply and demand. If there are more buyers than sellers, you will see prices firming. You will see competition among buyers which always results in higher prices. Needless to say, the reverse will happen if there becomes more sellers than buyers.
Over the last three weeks, we have been reaching out to all our clients to check in on them and make sure they are okay through this period. To see if there is anything we can do to assist them personally or to help them if they needed any maintenance or any work undertaken on their properties. In that process, there was no forward indication of any rash decisions. There appears to largely be a calmness among those with properties, although those with rental properties are of course significantly concerned about whether their income will be affected by non-rent payment or people paying lesser rent, and so on.
My experience over the 40+ years has shown that whenever a sudden shock occurs to the economy, there is a kneejerk reaction. That has already been seen, in part, by the official figures on consumer confidence that saw the largest fall in consumer confidence in history since records were first kept in 1967. No surprise that fear dominated, and consumer confidence plummeted, but as always happens as time passes, people can reassess, get more information, and drop some of the fear for realism. It was therefore no surprise that the same index also rose in one week by the largest increase it ever had. So whilst still well below previous highs, the index is way off its initial decline.
I think the other kneejerk reaction in terms of the real estate market is just a significant drop in activity altogether. As I touched on, there are significantly less new listings coming on the market and significantly less numbers of buyers in total, and so whilst the balance is still healthy, the volume is way down.
At present, there are no signs of any significant shift in pricing for real estate, although history tells us that will change, and I will talk more about that in the weeks ahead. As many people have asked questions about the rental market, I will also give you some really interesting information in that space as well.
Australians, you should be proud of yourselves because we are handling all things COVID-19 exceptionally well as a nation. Other countries are looking to us as an encouraging example of a nation coming together united in its approach to dealing with this once-in-a-lifetime event for us all. Let’s keep hold of the big picture and stay united and not let little issues start to create bickering and disharmony. We are all doing the best that we can.
Andrew Bell, OAM
Chief Executive Officer
The Ray White Surfers Paradise Group