Improvements in housing affordability and property bargains unlikely to occur due to COVID-19

The COVID-19 crisis is unlikely to improve housing affordability and widespread property bargains aren’t likely to eventuate in a big blow to home buyers. But hope is out there.

The coronavirus crisis probably won’t make housing more affordable in Australia and heavily speculated, widespread property bargains are unlikely to eventuate as a result of the pandemic, in a critical blow to home buyers.

However there is hope.

As we approach two months since extensive health restrictions were brought in and the Australian economy was hit hard by coronavirus, the bigger picture of how it is affecting our real estate industry is becoming somewhat clearer.

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Housing affordability may be unlikely to improve.

Prices haven’t slumped dramatically and, anecdotally at least, buyer confidence is rising.

The ripple effects of the virus and the subsequent economic downturn have hit some industries harder than others, but the real estate industry hasn’t sunk.

“We’re yet to see the impact of COVID-19 on house prices, and while we can safely assume that they won’t rise in the next few months, they won’t necessarily fall by a meaningful amount either,” said chief economist at realestate.com.au Nerida Conisbee.

Buyer confidence however is actually rising.

“Premium suburbs and big homes on big blocks are still seeing high levels of activity on realestate.com.au and a drop in listings suggests bargain hunters may be disappointed.

“While falling home values usually improve affordability, it is only helpful if people are still in a financially secure position to purchase them. Without a job, cheap housing is still unaffordable. Without a secure job, banks may be less inclined to lend.”

Home-owners can breathe a sigh of relief. Those looking will have to change their strategies.

“There are always some businesses and individuals that do well out of a downturn, and the same can be said for property,” Ms Conisbee said.

“Some markets will be hit but not every market will be impacted in the same way.”

The rental market is set to take a hit however, something that will cause serious concern to investors.

Prime Minister Scott Morrison has exercised his “moratorium on evictions” and increasing numbers of rental properties have hit the market.

“While it is still very uncertain how much prices will fall, rising unemployment and problems in the rental market suggest that eventually they will. The areas most at risk are those that feature large amounts of rental apartments,” Ms Conisbee said.

REA chief economist Nerida Conisbee has some bad news for those expecting property bargains.

What can property hunters do?

Doron Shmilovits had been looking with his partner Sarah Ciftci for their first home for 18 months. After feeling deflated as buyers rushed back to the market in the back end of 2019 and the start of 2020, they had begun to despair of buying a place to call their own.

Then COVID-19 hit.

“At the end of last year with buyers everywhere I became very pessimistic,” said Mr Shmilovits, 29, the principal of UX Law.

“Just before COVID-19 really hit we missed out on a place and after that my partner and I were crestfallen.

Successful new home buyers despite COVID-19, Doron Schmilovits and his partner Sarah Ciftci. Picture: Supplied

“We looked around at a few more places and were very worried when nothing came of that. We thought we would have to settle (for less than our ideal property).
“But we stuck with it and that’s the key, you need that patience.

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Doron Shmilovits’ new home caters for indoor and outdoor living.

“We had been looking for so long, we felt we had a good handle on prices and so we were ready to go when a good deal came along.”

After engaging buyer’s agent Marcus Kosmin, of Cohen Handler, Mr Shmilovits and his partner nabbed their first home just 10 days later in Sydney’s eastern suburbs, for less than what it was bought for almost three years ago.

Auctions are gone due to COVID-19 but issues with housing affordability remain.

“We got it at a good price, it ticked all the boxes and it was a place we could see our future in. We knew what we wanted, we saw the opportunity and we took it.”

Mr Kosmin said COVID-19 has brought with it a different market but not one that was impossible to crack.

“There are some good opportunities out there if you know what you are looking for and how to take advantage,” he said.

Opportunities are out there: Buyer's agent Marcus Kosmin of Cohen Handler. Picture: Supplied

“Instead of finding something that would suit them for two to five years and then moving on, my clients found a place to suit them for five to 10 years and they are in a better position now than they were and could have been.

“It’s a different time for all of us but as a property buyer that doesn’t mean you have to sit on your hands.”

Originally published as Improvements in housing affordability and property bargains unlikely to occur due to COVID-19