Should vendors stay or sell during the coronavirus?

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One of the myriad unknowns amongst the sea of unknowns at present is whether vendors should sell their properties or opt to ride out the coronavirus storm. However, like many things in life, there are positives and negatives to each side of that equation.

There is a significant percentage of people who have to sell every day of every week, perhaps because they’re upgrading or downsizing, moving for work or personal reasons, or they’ve already bought elsewhere. Then there are vendors who have to sell, unfortunately, due to financial distress, divorce or even a death in the family. All of these scenarios are common regardless of the market conditions, including the current one. However, the first cluster in particular should take comfort in the fact that they’ll be selling and buying in the same market – both sides of the transaction will in the same property boat as it were.

In times of economic turmoil, though, there is also always a cohort of people who sell because of fear and that usually never works out well for them financially in the long run. The many financial assistance packages currently available, including the ability to pause mortgage repayments as well as rental grants for tenants, will hopefully result in fewer of these types of sales over the months ahead.

What Do the Experts Say?
The impact on the Queensland property markets from the coronavirus is another unknown, because it will largely depend on how protracted the shutdown is as well as the overall impact on the economy. Antonia Mercorella, CEO of The Real Estate Institute of Queensland (REIQ) says Queensland property owners are well-placed to ride out the upheaval with most markets across the State in robust shape prior to the crisis.

“At the end of last year, our Brisbane median house price hit a record high, while many other locations around the State were recording healthy market conditions,” says Mercorella. “On top of that, house prices here remain affordable compared to Sydney and Melbourne, which is likely to be a positive for our market in the months ahead.”

Indeed, CoreLogic research was already showing a pivot to more affordable property before the pandemic began. CoreLogic Director of Research Tim Lawless highlights that rebounding price growth in Sydney and Melbourne over the past six months had started to benefit more affordable property. “Considering the stronger conditions evident across the top quartile of the largest cities, this sector is now becoming significantly less affordable and demand has been rippling towards housing where values are more affordable,” adds Lawless.

It’s also a concept that 2020 REIQ Buyers Agency of the Year and Propertyology Head of Research Simon Pressley believes could provide a “safe landing” for Queensland property markets once the crisis is over. “There’s no doubt that Queensland’s housing affordability will play a significant role in underpinning a safe landing from the temporary disruption caused by this germ,” explains Pressley. “Propertyology actually anticipates we’ll see a strong bounce back once it’s safe for everyone to come out of our cocoons again.”

Unfortunately, he doesn’t think the same can be said for many property owners and investors in expensive locations interstate. “When making the decision to buy during an environment of prosperity, many will not have paid enough attention to how their portfolio might stack up during times of adversity,” continues Pressley. “For some, the emotional and financial scaring will be motivation to, in the future, prioritise affordable locations as opposed to Sydney, Melbourne and Canberra.”

2020 REIQ Auctioneer of the Year and Apollo Auctions Director Justin Nickerson says the ability for property owners to pause mortgage repayments will help to prevent a run of mortgagee sales, which is generally one of the reasons why prices fall. Plus, the market is unlikely to grind to a halt. “People transact out of want, but people also transact out of need such as job transfers, school transfers, families getting bigger, families getting smaller, relationships breaking down or financial situations changing,” explains Nickerson. “All of these are reasons why people need to transact. People are still buying property at the moment because they have to. I don’t think it’s going to grind to a halt.”

A Post-Coronavirus Market
Looking ahead, albeit with an element of crystal ball-gazing at the present time, the experts agree that the future of Sunshine State property is a potential bright spot. Justin Nickerson predicts the market might pause over the short-term, but the pent-up demand over that period of time could return quite quickly, including auctions. “Remote auctions are a necessity move at present. The functionality of auctions has always been that we have no price, which emotionally engages buyers, we create competition, and we deliver a cash unconditional contract – those things haven’t changed,” he says. “What has changed is the spectacle of it – and in a country where property is almost a spectator sport in a lot of ways, that’s hard for some people to wrestle with, but the actual mechanics of an auction haven’t changed at all.”

Simon Pressley sees some Queensland property markets are likely to fare better than others over the short- to medium-term, with tourism locations the most likely to experience challenging conditions. However, other locations and industries are likely to hold their ground. “On the other hand, mining, manufacturing, agriculture, health and professional services look solid,” adds Pressley. “Townsville, Mackay, Rockhampton, Gladstone, Toowoomba and Brisbane have good prospects.”

Tim Lawless says the number of transactions across the nation is expected to fall significantly over coming months as some vendors opt to stay rather than sell.  But the temporary sales slowdown will help to insulate prices. “Considering the temporary nature of this crisis, along with unprecedented levels of government stimulus, leniency from lenders for distressed borrowers and record low interest rates, housing values are likely to more be insulated than sales activity,” further explains Lawless. “The temporary nature of this crisis implies that most homeowners will do their best to weather the storm, hoping for an eventual upside as the virus is contained and economic conditions improve. Once the virus is contained, we expect economic conditions to quickly improve, driving a turnaround in consumer spirits, which should flow through to housing market activity. When that will be, remains highly uncertain.”

REIQ CEO Antonia Mercorella says it’s vital for agents as well as property buyers and sellers to remember that in times of economic instability, real estate throughout history had remained resilient. “The term ‘safe as houses’ is not just a pithy marketing catchphrase. It’s a fact,” she says. “Property markets have held firm throughout history because, quite simply, they are providing shelter for their population.”

Nicola McDougall is an award-winning property and finance journalist with more than two decades’ experience. She is the Director of Bricks & Mortar Media and was previously the editor of Australian Property Investor magazine as well as the REIQ’s Executive Director of Corporate Affairs.