Should I buy a property in the middle of a pandemic?

Should I buy a property in the middle of a pandemic?
by admin-acuityfund
Written Articles by Ranjit (90)
Posted on October 14, 2020

The COVID-19 pandemic has ensured we are all living in very interesting times. But is it the right time to be purchasing a property?

There are some people who will say it is always the right time to buy property. After all, real estate is Australia’s most popular asset class. But there are others who attempt to time the market in the hope of snagging a good bargain.

When the COVID-19 pandemic first hit Australian shores and open homes went online, there was speculation that property prices would tank, particularly with the sharp rise of unemployment.

But the Australian housing market has remained largely resilient to this unprecedented health crisis and the subsequent recession. Figures from the Australian Bureau of Statistics (ABS) show that while the weighted average property prices of Australia’s eight capital cities fell 1.8% of the June quarter, they are still up 6.2% over the last 12 months.

Those considering purchasing a property soon would be wise to look at the latest Financial Stability Review (FSR) from the Reserve Bank of Australia. Published every six months, the latest edition of the FSR was released on 9 October and provides a decent analysis of the likely impact of COVID-19 on Australian real estate.

“Housing prices in Sydney and Melbourne have fallen only a little, with larger falls in inner city areas,” the report said.

“While credit is available at very low interest rates, reduced housing demand from very low immigration and the rise in unemployment contribute to the risk of further falls in housing prices. This increases the potential for losses for lenders in the event of a rise in distressed sales.

There are two major factors weighing on real estate prices that are directly related to the COVID-19 pandemic: low migration numbers and rising unemployment.

Lower migration has a significant impact on Australia’s population growth. How long this trend lasts remains to be seen, but a growing population is one of the fundamental drivers of property prices.

The second trend is the rise in unemployment. Again, it remains to be seen whether job losses from the COVID-19 crisis will be short-term or more structural. Either way, more Australians out of work is not a positive sign for property prices.

This brings us back to our original question: is it a good time to buy property? If you have a secure job and can service a home loan, then now could be an ideal time to buy. Rates are at record lows and with downward pressure on house prices there could be an opportunity to pick up a discounted property.

However, if your employment situation looks tenuous then you may want to reconsider purchasing a home. Ultimately, it all comes down to your individual circumstances.

The COVID-19 pandemic has not impacted all Australians equally. Those in a strong economic position are arguably best placed to take advantage of any future falls in property prices.

Whatever your personal situation, make sure you speak to a mortgage professional. Acuity Funding have been helping Australians purchase property for over 35 years. We are available to help you with all your home loan needs. Phone our office on 02 9484 0609.