One of the biggest challenges in 2020 has been the ability to make plans with any sense of certainty. From celebrations and social events to work and travel, coronavirus fallout has made it nearly impossible to make meaningful long terms plans.
This is true of the property sector too. Even though property professionals continue to operate with confidence in the long-term potential of real estate, trying to make near-term decisions of consequence has proved difficult.
The safest course has been to be professionally reactive to immediate information while maintaining a long-term perspective.
So what is the long term outlook for property in Sydney?
The last six months
There is plenty to learn by recapping what has happened so far in 2020. In early February, the seriousness of the COVID situation began to dawn upon us and by the time we hit a full national lockdown in March, a sense of panic had set in around everyone’s physical, financial and social well-being.
For those of us who work in the property sector, the progression of the pandemic brought uncertainty, with restrictions upon open houses severely limiting any activity.
But this first six-month period also allowed us all to formulate strategies.
The Federal government brought in JobKeeper and JobSeeker to ensure households retained income in the wake of rising unemployment as some businesses shutdown.
State governments also introduced rental legislation to provide protections for both tenants and landlords. Banks began offering mortgage repayment holidays and other flexible arrangements to ensure borrowers could breathe easier too. And the markets responded well. Because property is an illiquid asset, unlike shares, it retains price stability during dramatic market shocks.
A fall in listings helped prop up values, so many opportunistic buyers hoping to bag a bargain during this period of low/no open homes and virtual auctions were left disappointed.
Any predictions of double-digit price falls in Sydney and other capitals (and there were plenty) proved incorrect as well.Recent evidence from CoreLogic has shown that since mid-March, house prices have only softened around two per cent in Sydney and Perth. While Melbourne’s has dropped over four per cent, most other capitals have held steady.
Even more telling is the fact that house prices as compared to last year are up 11 per cent in Sydney and seven per cent in Melbourne, with other major capitals (apart from Perth) being in the black.
What this first six months has told us is that property is a resilient asset and the foundations established by good policy and industry adaption are working.
The next six months
So, what lies ahead for the next six months in Sydney’s real estate market?
In line with Australian society more generally, we are far more optimistic about the future than we were a few months back.
Firstly, the price resilience of property will remain. Shelter is a fundamental need, so demand from buyers and renters will continue.
Of course, certain property types and price points will fare better than others. Investor style stock, such as bedsit and one-bedroom design units, will struggle the most. A combination of rental oversupply fuelled by the drop in international visitors and students, as well as high unemployment in hospitality and tourism together with investors sitting on their hands for the foreseeable future, will see this sector hit hardest.
On the flipside, detached housing for owner-occupiers close to the City can expect to continue trading well. Vendors will only sell if they need to, thereby limiting stock which will help prop up prices. There will likely be a rise in listing numbers as those that pulled their property off the market earlier this year reconsider their selling plans. That said, I predict there will be very little ‘desperation’ selling in the next six months.
Good quality homes in blue-chip, inner-city suburbs will continue to be eagerly sought. These types of assets offer surety and long-term stability during tough times.
On the economic front, we continue to see the government and financial institutions adopt policies that help support property owners.
For example, JobKeeper and JobSeeker have been extended and targeted in an effective way, while banks are also allowing borrowers to continue their repayment relaxation periods.
As Sydneysiders will be able to continue working from home whilst having their overseas and even Queensland travel plans curtailed for the foreseeable future, we expect to see continuing demand for lifestyle properties in areas like Sydney’s Northern Beaches, Central Coast, Southern Highlands and South Coast.
The other element adding confidence to Sydney’s property market is that a resolution to the crisis feels imminent. Talks in recent weeks of successful stages in vaccine trials have brought some hope. In addition, many locations beyond NSW and Victoria have proved it’s possible to deal with the pandemic and continue to have a functioning economy.
The next six months will be full of opportunity and challenge. The best way to stay on top of market drivers and ensure the best outcomes for you is to have a professional buyers’ agent representing your interests. We are ideally placed to be both reactive and strategic, securing prime deals for your long-term benefit during challenging times.