Hi,

I wanted to share a few thoughts on the outlook for the property market.

At this stage, the progression of the virus, the duration of the economic restrictions, the effectiveness of the governments’ stimulus packages and the changes in consumer behaviours remain entirely unclear.  

However, I think we can draw useful conclusions from what we do know.  So let’s identify some things that do seem relatively more certain:

  • After this episode is complete, our government will be highly indebted relative to recent experience as a result of both expenditure and revenue foregone.  Tax increases are likely to be on the agenda;
  • The number of people in receipt of welfare has increased massively.  Whilst many will hopefully return to their jobs after hibernation, a large number are likely to remain on welfare for years;
  • Employers and employees alike are working through the challenges of working from home.  It seems clear that in future the number of people working from home will permanently increase – even if the extent of this is hard to predict.  This is likely to reduce demand for office space over time;
  • Many retail stores have closed or are struggling.  I expect that many will not reopen.  This is not a positive for retail landlords;
  • The trend to online shopping will accelerate as a result of restrictions and social distancing.  Some part of this change will be permanent;
  • I believe consumer confidence will be massively dented and take some time to recover.  This is not positive for property prices generally;
  • An enormous amount of wealth will have evaporated.  Income forgone, share market and asset price losses, failed businesses and more will result in losses in Australia that I believe will well exceed $1 trillion.  In this context even $200 billion of stimulus seems small; and
  • Many people, perhaps scarred by self isolation in small suburban homes and apartments, will look to escape to the space of the coast and country. 

For those that might see the present as an opportunity to buy property at a reduced price, I urge caution.  There is no precedent for the current economic restrictions and my personal view is that the extent of the damage is not yet fully understood or factored into asset prices.  My view is that further falls in asset prices are likely.

However, the above is merely my view.  Optimists point to historic precedents and the promised stimulus as being huge positives for the property market.  I hope they are right.

Lewis O’Brien

This Week’s Video – Consultant’s Contracts   

This week we are looking at the key mistakes that many clients make when signing contracts with town planners, draftspersons and surveyors.  Importantly, we also look at what changes you need to make to these contracts to protect your interests.

WATCH HERE

Clearly, a five minute video is not comprehensive and not designed to replace professional advice, but I hope that it will make you aware of issues that will help ensure your next development is a success.

Next week we will look at selling projects with plans and permits.

I have also created the first two videos covering basic topics for first home buyers – starting with nomination and finance conditions.  More to come….

I hope you enjoy the videos!

Lewis O’Brien