These comments are the writer’s own and do not necessarily reflect the current opinions and policies of the Real Estate Institute of Western Australia.
Just like any product, property is a commodity valued by the market it creates. As supply of housing tightens, inevitably resultant excessive demand pushes up values and / or rents. The converse is also true, too much supply causes soft demand and rents or values fall.
Sometimes, market sentiment predicated upon irrational reaction to certain events or policy settings can also impact property values. Governments learned this lesson when announcing in advance that stamp duties were to be cut from a certain date or a new buyer grant was to be introduced down-the-track and briefly wondered why sales activity stopped dead. When the date arrived, demand would spike, pushing up prices effectively wiping away any buyer savings anyway.
Up until the middle of last week, collective community thought was that Perth’s property recovery was underway. Sales volumes had begun to rise, competition for quality family homes was strong and prices were rising. Rents, too, were beginning to recover from four-year lows as population and jobs growth improved demand in a market beginning to show signs of shortening supply.
By last weekend, media was full of the global spread of COVID-19. European countries closed borders, thousands had contracted and many had died from the disease, share markets crashed, self-isolation laws were put in place and supermarket shelves were stripped bare.
It’s no surprise then that both buyers and sellers are re-thinking their property plans at the start of this week.
Some buyers are withdrawing their offers, sellers are deciding against selling now and rent arrears in tenancies are beginning to rise. Everyone, it seems, is drawing in breath and waiting to see what’s next.
However, should we really be putting our lives on hold in such dramatic fashion? We still have very few members of the community infected, most people I am meeting are sensibly “social distancing” and the fundamentals of our civil society and economy remain firmly intact.
Once the worst of the COVID-19 pandemic is over, it is widely anticipated that life as we know it will return to normal relatively quickly and we’ll be wondering what all the fuss was about.
The current situation ought not give rise to irrational decisions around property. Tenants should still pay rent, buyers should continue with their plans and sellers ought to take advantage of the improving 2020 market. Otherwise, group mentality will see a rush to buy once the crisis passes (perhaps like the great loo-paper rush of March 2020) pushing up prices in an unsustainable way.
So, when it comes to property, play the long game and collectively the property market will remain stable.
By Hayden Groves
REIA Deputy President