At the start of 2020, we all thought a Corona was something that came with a wedge of a lime and went alright on a hot day. Six months on, the virus of the same name has upended life as we know it and affected pretty much every aspect of our day-to-day routines. In the first of this three-part series, we look at the impact that COVID-19 has had on the Australian property market and what that means for first home buyers in the ‘new normal’.
It’s hard to believe it’s only been three months since Sco Mo announced that, OK, he wasn’t going to go to that Sharkies game after all and maybe the rest of us should all go and work from home for a while. Coronavirus was spreading and, all of a sudden, words like “social distancing” and “flattening the curve” were part of our collective vocabulary.
For some, the COVID-19 pandemic has been an opportunity to perfect their sourdough recipe and teach themselves how to play the guitar. For others, it’s been a pretty rough ride, with hundreds of thousands of Aussies grappling with health concerns, lost jobs, reduced wages or the isolation of lockdown.
Those hoping to become homeowners in 2020 haven’t escaped unscathed either – the pandemic quickly threw the property market into disarray, with banks tightening lending criteria, doors slammed shut on inspections, and auctions moved online or cancelled completely.
So as we all begin to emerge from our homes, blinking into the sunlight and dusting sourdough crumbs from our clothes, where does the property market stand now and what does it mean for first home buyers?
What’s going on with the Sydney property market?
At the time of writing, many experts are saying it’s too early to tell what the ongoing impact of the virus will be on the Sydney property market. But if you were hopeful of snapping up a (heavily sanitised) bargain post-pandemic, the market hasn’t quite reached the doom-and-gloom depths that were predicted at the height of the crisis.
According to the CoreLogic Home Values Index published at the start of June, the average value of a Sydney property only dropped 0.4% during May. While this represents the first month-on-month decline in almost a year, the median dwelling price is still 3.9% higher than it was at the start of 2020, and 14.3% up from where it was this time last year. It seems even a global pandemic can’t put the brakes on the Sydney property steam train completely.
However, what DID change during the pandemic was the amount of transaction activity, that is, the number of houses and apartments being bought and sold. Sales activity dropped by a third in April but started to bounce back in May as restrictions eased.
So while you’re no longer getting absolute doughnuts every time you refresh your property apps for new listings, they won’t necessarily have a bargain basement price tag attached – there is still plenty of demand from buyers with a deposit burning a hole in their pocket.
What health and safety restrictions are in place for inspections and auctions?
While we can do a lot more now than we could back in April (Shopping! Cafes! Beers!), we’re still not quite back to the pre-pandemic ways of doing things, and the same goes for house-hunting activities.
The good news is that real estate restrictions in NSW were eased in mid-May, so agents and vendors can now hold on-site auctions and property inspections IRL. However, they must still follow all the usual health and safety guidelines, such as the 1.5m rule for physical distancing and allowing at least four square metres of space for each person. Agents need to provide hand sanitiser and regularly clean high-touch surfaces. They’ll take your contact details at each inspection and auction in case they’re needed for contact tracing later, and may ask you to stay home if you’re showing symptoms of the virus.
Some agents or vendors may still choose to use teleconference facilities or opt for live-streamed auctions, but at least you can physically visit properties now instead of relying on a dodgy Blair Witch-style virtual tour via Zoom.
Are lenders still approving home loans?
In a word, yes. With the big banks hit hard by the economic effects of the pandemic and lots of their customers deferring their mortgage repayments, they are still on the hunt for new customers and many are offering attractive rates to lure them in.
But just as lenders cracked down after last year’s Banking Royal Commission, they’re erring on the side of caution during COVID-19 as well. They know that a lot of people have taken a financial hit during the pandemic, so they may reconsider pre-approvals or ask for updated numbers to ensure borrowers are still able to service their mortgage in the current climate.
Check out Part Two of our ‘Life After Lockdown’ series for more tips on how to maximise your chances of getting a home loan during the COVID-19 pandemic.
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