Low Rates Poised To Buoy Prices

The low interest-rate environment will be crucial in helping cushion the negative impact of the coronavirus outbreak on house prices, according to the Property Investment Professionals of Australia (PIPA).

Peter Koulizos, chairperson of PIPA, said the recent rate cuts by the Reserve Bank of Australia are amongst the many financial supports available that would help prevent any significant price declines in the medium term.

"Property owners are well-placed to ride out any temporary downturn," he said.

Koulizos said the banks' offer to defer mortgage payments would also be a crucial support for property investors who are faced with financial difficulties amid the COVID-19 outbreak.

Still, Koulizos believes property prices might temporarily decline by as much as 10%, but they are poised to rebound quickly.

"Whenever there is a global financial shock, some commentators predict huge property price falls, which ultimately don't happen. There may be a slight downturn in prices over the short term, but real estate is a long-term investment that has historically shown resilience time and time again," he said.

However, rental markets are expected to bear the brunt of the situation, as many short-term listings are added to the supply of houses. As a result, rents will likely trend lower.

"Rental markets were in good shape prior to the pandemic, but there has been a significant number of holiday-related listings come on to the market over recent weeks, which is likely to continue for some time yet," Koulizos said.

Despite the projected decline in rent, property investors are in a good position to manage their rental income, especially with the lower mortgage costs.

"It is far better for this to happen now with most sales and rental markets in healthy shape before the crisis began," he said.

A recent report from CoreLogic found the the coronavirus outbreak has yet to pull property values down in the negative territory.

Over the 28 days ending on 21 April, prices are still 0.4% higher than a year ago. This growth, however, already reflects a moderation from the 1.1% gain in March.

Source: https://www.yourinvestmentpropertymag.com.au/news/low-rates-poised-to-buoy-prices-271134.aspx

Tacadena, G. (2020, April 28). Low rates poised to buoy prices. Retrieved from https://www.yourinvestmentpropertymag.com.au/news/low-rates-poised-to-buoy-prices-271134.aspx