Property Post COVID-19 - 01 Jan 1970
Following on from our highly successful first episode, Property Post COVID-19, we continue our look into the property market, diving deep into the numbers and speaking directly to those at the coal face.
In our follow up show, Property Post COVID-19 Episode 2, we speak with Jo Masters, Chief Economist at Ernst & Young, Steven Bennett at Charter Hall, REIA's President Adrian Kelly and SQM's Louis Christopher.
Since our first Property Post COVID-19 broadcast in June, the world has of course turned but where is property headed? We’ve assembled experts from Charter Hall, EY, Real Estate Institute of Australia, and SQM Research to speak with Oriel Morrison and Chris Gray and share their views.
Starting the program off with a bang, Louis Christopher, Owner and Managing Director of SQM Research say “Our outlook at the moment is still kind of bearish, particularly for Sydney and Melbourne.” Noting price falls and a possible new trend, Christopher says “We believe there’s been a bit of a mass exodus of people living in the inner-city locations of those two cities and moving outwards, moving out towards regional Australia.” While rental vacancy rates in the inner city areas are in excess of 12%, regional Australia is seeing rates plummeting. Christopher puts this down to those people who can work from home, reassessing their need to be within commuting distance to the city. “This has major ramifications over the medium to long term for the capital cities,” he says.
We then move onto the effects of COVID-19 on the commercial property sector with Steven Bennett, Direct CEO at Charter Hall. With the impact on commercial offices and discretionary retail being well-publicised there are segments such as industrial and logistics that are actually benefitting from an increase in e-commerce and online shopping activity. “As for the death of the office, look I read many of those articles as well. To be frank, it’s not something I buy into at all.” Holding up Silicon Valley as an example, companies will continue to seek competitive advantage by location clustering. According to Bennett, “you want to be around similar people and networks.”
Turning to the broader economy and with little in the way of historical guidance in terms of policy response to the current pandemic, according to Jo Masters, Oceania Chief Economist at EY “We’re operating with a lot of uncertainty on almost every front.” As the government announces the extension and tapering of fiscal measures, Masters notes it was important to tighten those policies “ You want to support the economy” she says “but you want to make sure it’s as targeted as possible.” And looking to the residential property market, that in recent months has been supported by mortgage deferrals, low-interest rates, and reduced supply, Masters says “I think as we go ahead we are going to see further house price falls. My guess is that demand will remain relatively weak but we might start to see some supply through 2021.”
There’s a chance property will get through this period, having suffered a few bruises for sure, but according to Adrian Kelly, President, Real Estate Institute of Australia, “It would seem to us that so long as we can keep this pandemic under control, that hopefully, we’ll have some sort of soft landing for those people that need it” he says. And with initial government concerns around tenants' inability to pay rent having been allayed somewhat as a result of fiscal stimulus packages, Kelly says it’s the banks we should be taking our hats off to. By allowing mortgages to be deferred in the way they have, the number of forced sales will be minimized. “The banks have been telling us that the last thing they want to see is any form of forced sales,” says Kelly. “The last thing that forced sales to do is, well it does nothing for the banks' customers and post-Royal Commission the banks are very very keen to play their part and do the right thing but forced sales of real estate also do nothing for the bank's shareholder value either and the banks have been very clear with us in making those statements,” he says.
Find out more from our experts by watching the full episode above.
12 August, 2020
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