Government restrictions to stop the spread of COVID-19 have been very confronting for the community. Unlike during the GFC, which reduced consumers’ super balances, share portfolios and ability to access credit, this environment has also created a fundamental concern the person next to them could be carrying coronavirus. This has impacted every facet of our lives, including how we shop, work, socialise and engage in recreational activities.
In the short term, our environment has created a challenging set of working conditions which property market participants have quickly adapted to. When market conditions become more favourable, these new processes will provide exceptional consumer convenience as I expect consumers, like with other online experiences, will see value engaging on their own terms.
The Canberra market is performing well. In the space of only days since banning public auctions, agents were hosting auctions online. The weekend of Saturday 28 March was the first opportunity to see how the market would react, which turned out to be positive as the preliminary auction clearance rate determined by CoreLogic was 64.7%. This included 20 results not captured by Domain, providing a deeper insight into market conditions.
While auctions are conducted online, there will be a higher proportion of properties reported as withdrawn from sale. To accurately compare conditions to previous periods, it is important to add the number of properties passed in and withdrawn together to calculate the total number of properties which failed to sell. It is easier to find historical results using Domain’s data, which showed 27 failed to sell both over the weekend and the same weekend last year.
Comparing conditions to this time last year, buyers who want to own property have access to credit and lenders with an appetite to lend. The Reserve Bank of Australia has lowered the cash rate by 1.25% to a historically low 0.25%. Lenders are offering low one-, two- and three-year fixed rates, which provide repayment certainty and significantly increase a borrower’s capacity. To help property owners impacted by COVID-19, lenders are offering repayment holidays for up to six-months with interest capitalised, effectively extending the loan term.
As we adapt to what will become the new normal in the property market and world around us, taking into account all of the factors put in place to mitigate potential mortgage stress and keep people employed, buyer sentiment will shift, resulting in increased demand. When this happens, those who didn’t make a decision to buy earlier often have regret they didn’t capitalise on the opportunities they had.
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