Real Estate post-Covid. This is a question many ask these days. Either you are a homeowner struggling to pay the mortgage, a renter who doesn’t know if you will be able to afford the rent or an investor struggling with the social situation of their tenants and their own financial struggle, it is impossible not to think about Real Estate post-Covid.
To complement my “Weekly Conversation” on YouTube, this article contains an insider opinion of Bruno Araújo. Bruno is a Property Manager, who has been in this industry for more than 10 years. His extensive experience, both in sales and property management, and his deep knowledge of the Australian Real Estate market gives him the expertise to be able to talk about the current situation and have an idea of what the future may bring to this sector.
How the pandemic affected the Real Estate Market
When media speak of Real Estate Market they often speak in a general sense, and what this pandemic has done is separated this general analyses further apart than ever before.
In Sydney, there are certain pockets of Sydney that are affected in a major way and then there are others which are bucking the trend and performing above expectations.
These results have a lot to do with the demographic and type of employment in those areas.
The same applies to the rental market, some areas have performed reasonably well and others have struggled especially in areas where it was heavily reliant of students, hospitality-based tenants and people who were here on Visas.
The Inner West and the city have been affected because these tenants are no longer there, either with no job or forced to return to their home country.
On average, Sales have come down, no doubt, but the drop has not been as dramatic as some people first thought, partly due to governments stimulus and support and, of course, banks assisting to a certain degree with mortgage freeze for a period of 3 months.
The stock of properties on sales has also dramatically decreased offering less choice to potential buyers. Buyers have been very cautious thought and above $1.5m properties tend to stay on the market far longer than before, unless they are situated in a niche suburb or location.
Rentals, on the other hand, have suffered the biggest drop in years, some landlords not receiving any rent and others forced to half their rent as a result of Covid. Government intervention with laws that prevented landlords from terminating tenants has had a massive effect with little to no support to landlords. Although Landlords hold an asset they are by no means any better off than a tenant, relying heavily on rental income to pay for their outgoings and mortgage and, ironically, the Government gave the power to tenants to a certain extent to get payment reductions, or reprieves but gave no such incentives to landlords.
Its been a tough time for Property Managers, having to juggle the emotional and financial struggles with both tenants and landlords and try to come to an agreement that benefits both parties.
In NSW, at least we have gone through the first 3 months in March to May during the lockdown and now enjoying some freedom, but our neighbours in Victoria, unfortunately, are yet to come see through this tough lockdown restrictions.
The future of Real Estate
Commercial property will have a long way to go before it recovers, the massive losses incurred will not be recovered until borders are open nationally and business can operate normally.
For the corporate, I believe some have seen it’s possible to work from home and potentially eliminate office rent and space, but this may work for some but not all, especially for companies who manage large teams.
With Mortgage Freezes and Job Keeper coming to an end in the coming months, we will be in uncharted territory it will very much depend on how our economy prevails during Covid conditions, can we operate with social distancing, tracing and hygiene?
If restrictions are not eased, I’m afraid some will be affected, but the effects won’t be seen for months to come, it won’t happen straight away but it will happen.