First recession in three decades
Traditionally it's believed that a recession is a bad time to buy a property.
And there can be some truth in this view.
After all, an economic contraction can be a period where your income falls, or worse you might lose your job, and credit availability may tighten, so consumers tend to be naturally more cautious during these periods.
The hardest hit industries for employment in 2020 have included some retail sectors, tourism, hospitality, and the arts, and indeed some lenders may have become more cautious about lending to employees in related roles.
But this recession has been anything but typical, induced by an untimely global pandemic, while governments have leapt into action to pour unprecedented stimulus into the pockets of consumers.
With mortgage rates falling to the lowest level on record, and interest rates being likely to remain at rock bottom for some years to come, some housing markets around the world have been remarkably resilient, and some have even experienced solid price growth.
The link between the cost of money and generic house price growth has been well established in Australia over a long period.
Home sales in the U.S. recently rebounded and soared to the highest level since 2006, and some states have seen prices hitting record highs.
In Australia, the housing market has generally been more stable, but there are some localised factors which you need to consider, in addition to your own personal circumstances.
There is also a persistent undersupply of houses with good access to employment hubs, particularly in Sydney, Melbourne, and south-east Queensland, where land scarcity has driven house prices up.
Saving the deposit
It's not all been bad news even for consumers, with the government launching an unprecedented range of stimulus packages, while Australians have also been largely unable to travel, holiday, and spend overseas.
Many Australians have also accessed their superannuation early, and the household saving ratio jumped to nearly 20 per cent in the June quarter, something which we haven't seen since the 1970s.
Unlike in 2008, today's global recession has not been driven by a real estate crash and an ensuing rush of foreclosures.
If you are in position to buy property, you need to drill a bit deeper to determine the right course of action for you.
The paradox of a recession is that housing prices and mortgage rates can move lower in tandem, to the extent that buying a property can eventually become markedly more attractive.
There's also likely to be far less competition from property investors during an economic downturn, so the search and buying process can be more fruitful, and you may in turn be able to exercise your negotiation skills to secure a more attractive deal.
With housing stimulus measures also in place, including stamp duty exemptions, HomeBuilder, and the First Home Loan Deposit Scheme, plenty of Australians will take advantage of record low borrowing rates to buy property in the second half of 2020.
The unusual nature of the COVID-19 recession has led to several interesting demographic trends, which over the short term at least will impact housing demand and prices within markets at the local level.
Some families are opting to relocate away from the denser capital city areas and are looking to take advantage of lifestyle locations, while apartment vacancy rates in the inner cities have been remarkably high given the absence of international students and tourism.
Broadly speaking there is a persistent undersupply of family-appropriate housing in the inner- and middle-ring suburbs of our major capital cities, so while many lifestyle and coastal locations are flourishing, high-rise apartments in the big conurbations are frequently empty or floundering.
Consequently, the demand for houses in suburbia remains strong, but the demand for rental apartments remains below trend.
You can refer to our WeIntelligence tools and other market reports for further details.
Market research and when it's a good time to buy
Overall, it may be a good time for you to buy property if you meet the following criteria:
You can use our free WeIntelligence tools to begin your top-down market research, including looking at our exclusive state level and suburb insights.
If you'd like full-service assistance from one of our licensed and trusted buyer's agents, including market research and potentially sourcing 'off-market' deals or silent sales which most buyers never see, please see our WeFind service here.
If you know where and what you want to buy, but your budget doesn't extend to paying for a full service buyer's agent fee, please see our more affordable WeBuy service here, which can help to negotiate thousands off your purchase price and de-risk the purchase exercise for you, reducing time, cost, and stress.