How economic trends could impact your portfolio in the mid-term
In this episode of The Smart Property Investment Show, IPA’s general manager of technical policy, Tony Greco, gives hi...
An adviser has shed light on whether property prices are about as low as they’re likely to go amid the coronavirus pandemic.
Richard Sheppard of Insynergy Property Wealth Advisory says property prices are unlikely to fall much further in most major locations due to the coronavirus crisis.
“For those individuals who are in a position to take advantage of current market conditions, now is the time to organise your finance, finalise your strategy as well as your expert team, and start making offers,” Mr Sheppard said.
“Buyers who purchase in the next few months can benefit from market prices about 3 to 7 per cent lower than they were just a month ago, depending on the location.
“That said, Canberra property prices do not appear to have fallen and pockets of Brisbane and Adelaide also have remained robust during the crisis.”
Mr Sheppard noted that the bottom of the sharemarket was around mid-March, which also coincided with the peak of community fear and uncertainty surrounding the coronavirus.
“However, the bottom of some of the property markets will last for about the next four weeks, according to my calculations,” he said.
“Once we start seeing more positive news generally, as well as further relaxation of some restrictions, the market will start firming again quickly.
“The start of the bottom of the market is generally when there is peak negative news, which was the situation about a month ago.”
Mr Sheppard said good property markets had continued to rise over the decades, even though the world had experienced a number of different economic shocks, “including a different coronavirus, SARS, in 2003”.
“The same is likely to happen this time around, too. However, some locations will fare better than others,” he said.
“The fundamentals are very strong for the medium- to long-term in certain Brisbane, Canberra and Adelaide sub-markets that we are currently recommending to clients.
“We also believe the risk of COVID-19 pushing these markets backwards is quite low, especially if you’re picking up a bargain over the coming weeks.”
Mr Sheppard said yields in these markets are 4.5 per cent to 6 per cent-plus for a “well-selected property”. With investor interest rates as low as 2.84 per cent, investors can be positive cash flow by about 1 to 3 per cent net of costs, he added.
“Some vendors are also offering six to 12-month rental guarantees for added security and peace of mind,” Mr Sheppard said.
“So, property values would need to go backwards more than this for you to lose money.
“Of course, there is a risk of higher vacancy with job losses. However, the above markets have already had substantially reducing vacancy in the years leading up to now.”
Light at the end of the tunnel
Mr Sheppard said easing of COVID-19 restrictions, coupled with optimism surrounding the daily new case figures “offered a glimmer of light at the end of this tunnel”.
“For those who now know where they stand in terms of job security, there’s a sense of realisation that this situation could present some opportunities as well as the obvious challenges,” he said.
Mr Sheppard said buyers who are in a position to take advantage of the present market conditions “can reap the benefits over the long term, with the added bonus that they will also be supporting the economy”.
“If anyone has to sell at the moment, they need a buyer. It’s as simple as that,” he said.
“It’s not some sort of negative opportunism: it’s smart investing and it’s good for the economy, which is vital at the moment.”