The COVID economy has almost stopped economic activity, but that does make it an ideal opportunity for some. Property values could dive 30%, so: is this the time to acquire?
At a time when most are rightly urging cash conservation and caution, pouring over property listings does sound like an act of madness. But for the astute investor, it’s actually entirely sensible.
- Property prices are falling and may not have reached the floor. And clearance rates have taken a massive hit. Normally, the pre-Easter weekend will see clearance rates of around 68 per cent, but last week 45 per cent of properties were withdrawn from sale and 84 per cent of auctions sold prior to the event. Some sellers locked into deals on other properties and who need to offload their homes are desperate.
- Investors looking to reduce debt and obtain cash are also selling, putting interesting tenanted units on the market with income. Admittedly, incomes are down and tenants are now protected by the moratorium, but once the economy snaps back you’ll have snapped up a bargain with potential long-term income.
- Money has never been cheaper – nor the banks more accomodating. You can get a home loan from U Bank for 2.59% and you can probably get help with repayments during the present crisis. AMP, for instance, have a ‘special offer’ where rates are down to 2.77% p.a.
- Some have said that this could be a once-in-a-generation opportunity particularly in the capital cities.
How can you test market:
Because of the government limitations on gatherings, most agents are holding online auctions, holding private inspections, offering properties through private treaties, sale or “off-market” sales.
Here are our tips to get into the market:
- Know your budget – and articulate it. It will save you huge amounts of time and embarrassment if you just let an agent know what you’ve got. And don’t be afraid – you don’t know what others are saying. Now is not the time to spend any more than you should – so be prepared to walk away. We promise there will be another “This is the one” around the corner somewhere.
- Contact big real estate agents and advise them that you are in the market and talk to them about your preferences ie are you looking for an apartment or a house.
- Do homework on where fair value lies by looking at recent comparable sales – but remember, this market is different. If you’re looking at an investment property, it’s because the seller is desperate to get out. Expect to pay lots less – you’re taking all the risk.
- Be careful. This is an extremely volatile market. Don’t stray from what you can afford and assess your own position of repaying the loan. Are you a cash buyer, in which case the world is your oyster. If you’re financing from your salary, how safe is your job and what happens if you get sick?
And here are three reasons NOT to buy right now
- Private treaties and off-market deals,made popular now by social-distancing rules, are far less transparent methods of transaction than auctions. The risk of overpaying is greater because you can’t see the competition and hear their offers directly.
- There is always the possibility your financial circumstances may change. Only enter into the property market if you know you have job security, or you have a pool of cash as a safety net.
- There won’t be as much stock available on the market. So you might have to play a waiting game to get the property you want.