Six months ago, Victoria had the strongest economy and real estate market in the country – the road back to that point will be a challenging one with possible pot holes along the way.
If anyone knows what is being done and what needs to be done to ensure a strong rebound, it is Paul Guerra, the chief executive of the Victorian Chamber of Commerce and Industry.
On our Real Estate Client Information Webinar, Paul and our Director Brad Teal shared their insights with Brad Teal Real Estate CEO Antoinette Truda.
This is what the post-lockdown period will mean for buyers, sellers, landlords, tenants and real estate agents.
There will be a spike in demand for homes and rental properties
Pent-up demand in both the rental and sales markets will likely lead to a spike in demand as we move out of stage 4 lockdown.
“Over this period of time, people have had ample time to consider their home situations,” Brad Teal said.
“For homeowners they may have decided their home is too small, or it’s too big. They will have a better idea of what they do and don’t want and need. There will be a large amount of activity when homes are open again.
“For renters there will also be a big shift, rental leases will have expired and people will be looking to move on. We expect significant activity here too.”
“There will be a lot of people looking.”
Banks will continue to support homeowners and businesses, to a point
The banks have signalled their support for borrowers through the economic recovery with extended loan deferrals and the protection of customers’ credit ratings.
“Banks hold probably the biggest lever in the whole game and they have a key role to play in averting mortgage stress, a widespread asset sell off and a slump in prices” Brad Teal said.
“The banks are being encouraged to be supportive by the government. Doomsdayers are saying there will be a lot of forced sales but banks will be looking for ways to support property owners if they are having trouble.
“If there is no other way they will force a sale, but they will be highly supportive of the progress of the economy coming back. They won’t put undue pressure on the mortgage belt.”
Paul Guerra said it was in lenders’ interests to support those who owed them money and show them goodwill.
“The banks themselves have been pretty good, perhaps given their [poor] reputation before,” he said.
“They have been treating clients with the care they should be given.”
Real estate prices will likely remain stable
Melbourne home prices have remained resilient despite the coronavirus pandemic.
Prices slipped 1.2 per cent in August, according to CoreLogic and 3.5 per cent over the quarter, but remain up 5.9 per cent over the last year.
“Across Melbourne the market has grown over the last 12 months,” Brad Teal said.
“Over the last few months it has been pretty steady. This has been our experience. May, June and July produced good results, nothing like the 30 per cent fall some were predicting.”
“Since COVID-19 hit in March, we have not seen volatility in prices.”
How the government continues to manage the economic situation, through schemes such as JobKeeper will also have an influence here.
Homebuyers habits are changing
The new habits homebuyers have embraced during the pandemic are likely to have a role going forward. The ways in which potential buyers are sounding out homes has evolved. Agents and vendors have had to adjust in turn.
Virtual inspections and online auctions will form a crucial part of the sales process moving forward.
“There has been a rise of over 300 per cent in 3D views of homes,” Brad Teal said.
“It came from a small base but it shows that this is a way in which buyers want to look at property online. Where in the past we would have used 3D photography for five per cent of listings we will increase that now to 50 per cent and shift money in our advertising schedule to do that.”
Buyers have also shown a willingness to adopt new transaction methods.
“Our experience is that there has been good demand at a number of virtual auctions with three, four and five bidders,” Brad Teal said.
We all need to be ready to rapidly adapt as the health restrictions change
Issues with commercial property
The medium term future for commercial property is the most uncertain.
“Commercial tenancies are the biggest issue, because the amount of inquiries leading into lockdown was so low,” Brad Teal said.
“It was uncharacteristically low and the single biggest issue here is the lack of confidence. Over July we had no enquiries. We don’t want to lose tenants and if we do it will be a challenge to re-let them.”
Premier Daniel Andrews has unveiled a $3 billion package in the form of cash grants, tax relief and cashflow for business, calling it the “biggest package of business support in the history of this state”.
These support packages are key to injecting confidence and driving a faster recovery in the commercial sector. Full details are available here.
Tension between landlords and tenants is certain
Government has effectively managed the economic situations both tenants and landlords have found themselves in. However as we move out of lockdown and the economy begins to build momentum, there will be friction.
“There will be tension that hits the market,” Paul Guerra said.
“Where support for tenants will clash with support for landlords. Because landlords can’t continue to sustain reduced rentals
“This has to be something that is a fair result for tenants as well as landlords.”
Brad Teal said he felt the situation was currently weighted too heavily in favour of tenants.
“We have found it to be very lopsided,” he said.
“The changes that have been made to the law very much favour tenants. Landlords don’t have a voice in all of this. If tenants aren’t paying rent, landlords have no money coming in. You can’t kick tenants out and you can’t go to VCAT.
“The situation, the balance needs to be better than it is.”
Changes to tax policy
Crucial changes to Australian tax policy are possible in 2021.
These changes could affect buyers, sellers, landlords and renters alike.
“Now is the time, we believe, to have true tax reform,” Paul Guerra said.
“Whether the government has enough courage to do this remains to be seen.
“If for example, they remove payroll tax, which many see as simply a tax on employees, the state governments will want to know where they are to raise that money from if the federal government does not fill that bucket.”
Capital Gains Tax and stamp duty are two other taxes that will hopefully be reviewed.
“CGT is one of the great ongoing debates,” Paul Guerra said.
“If we are having an honest conversation about tax then everything has to be on the table. Otherwise we are just trimming at the edges. It’s a perfect opportunity for the National Cabinet with all the Premiers together for them to have a look at it.
“It’s complex but we would be disappointed if this opportunity to reform the tax system was not taken.”
What businesses should be doing now
Business should be in a position to move quickly and efficiently through the health restrictions stages.
“You need to start thinking about what you need to do once the green light is given,” Paul Guerra said.
“Will you need to retrain staff? What different COVID-safe measures will you need to put in place? What will this all look like for your customers?
“You want to be able to accelerate through the restrictions until you can be fully open.”
Support for businesses is available
Paul Guerra suggested all businesses visit business.vic.gov.au to educate themselves about the help available.
Eligible businesses can access grants from both the Victorian and Federal Governments.
The Australia Tax Office website also has information about support for businesses.
In conclusion: it’s all about mindset
“The road out has to deal with living with COVID-19,” Paul Guerra said.
“There is optimism about a vaccine, but there is currently no vaccine and we have to learn how to live with it to get industry and business up again.”
“It’s all about mindset, government initiatives like JobKeeper and a bit of fingers crossed too,” Brad Teal said.
Every Victorian has to be positive and ready to be agile and adapt as the restrictions change and the economy gathers steam.
You can view our Brad Teal Real Estate Client Information webinar here.
If you have any questions please contact us at Brad Teal today.