Coronavirus impact on segments of the market

Discussion in 'Property Market Economics' started by Craig John, 8th Apr, 2020.

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  1. Craig John

    Craig John Active Member

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    I think most threads are now saying that property prices are unlikely to increase in the short term. However in the event that property prices do fall, I would imagine they wouldn’t fall equally. How do you think this could play out? For example, are capital cities like sydney and melbourne more immune than regional areas? Are blue chip suburbs like the lower north shore/eastern suburbs/inner west of sydney safer than outer suburbs? If we were to purchase now, what variables would you be looking at to find an area that will be less impacted during this downturn?
     
    Craig John, 8th Apr, 2020
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  2. Trainee

    Trainee Well-Known Member

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    Very hard to tell. Sydney and Melbourne are also the most expensive. It depends who loses jobs.

    Generally, new land, development sites and OTP will probably fall the most, as developers have more stringent loans, and if valuations fall OTP will have trouble settling.

    Outer suburbs and new builds that have already settled are more at risk because they often have the highest LVRs and owners are new buyers who maxed out their borrowing capacity. Also no uniqueness means its harder to sell.

    Generally older suburbs will be less affected, in the sense that there are more people who have owned for longer so their LVRs are lower and lower repayments relative to pay.

    The process is the same. Just bargain harder.
     
    Trainee, 8th Apr, 2020
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  3. Simon Hampel

    Simon Hampel Founder Staff Member

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    A lot of this has already been discussed in other recent threads, but in summary:

    Melbourne and Sydney have seen huge price growth in recent years compared to all the other cities. Percentage-wise, they are likely to be much harder hit than the other cities because the debt levels are so much higher and expenses are so much higher.

    The government stimulus measures are universal across the country - not based on average incomes or median property prices or median rents. So it's reasonable to assume that areas with lower incomes and lower rents will be less affected once unemployed people get access to their government payments.

    Same goes for regional vs city - the impact should be less because it doesn't cost as much to live there.

    However, you do need to consider the industry-specific impacts. Areas which are heavily dependent on tourism will suffer disproportionately more than other areas.

    Blue chip suburbs are going to be a mixture I feel - some people will just continue working from home and no income lost. Some will have good buffers in place because of their high wealth and investments. Others may be in an affected industry and go from high incomes to zero - but still have high expenses and government stimulus won't help much, so could be in real trouble if this goes on too long.
     
    Simon Hampel, 8th Apr, 2020
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  4. Sackie

    Sackie Well-Known Member

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    Personally I believe almost anything is possible.


    Not too long ago Syd and Melb had a decent correction. Then before you could say BOO, it did a 180 and in most cases surpassed the lows. Market psychology can be quite irrational. Unpredictable at times. Especially after it goes through something traumatic on a national level.

    It wouldn't surprise me at all if once we get the health crisis under control we see all kinds of markets explode. Jubilance as the war is over.

    Then when the negative economic data starts rolling out non stop, markets could do another one 180.

    Anything is possible. Expect the unexpected is what I've learnt over the years. But plan accordingly.
     
    Sackie, 8th Apr, 2020
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