MY OUTLOOK FOR AUSTRALIAN RESIDENTIAL PROPERTY IN THE WAKE COVID-19
There is no doubt that COVID-19 (Coronavirus) has caused massive economic disruption and understandably people are feeling anxious about what will happen to residential property prices. There’s a strong argument that it will strengthen due to a combination of inflation, collapsing retail and office property values and low interest rates. Money has to go somewhere, and it will shift into fixed assets like residential property and the stock market. The stock market is more risky as there will be a lot of businesses permanently weakened by the economic malaise of the virus
Even before the pandemic hit the world with a brutal blow, retail property was under severe pressure with the change in spending habits as shoppers moved en masse to buying online. Since the lockdown physical retail shopping has ground to a halt in a shift never seen before. Tenants are not paying rent. Many won’t return after the crisis subsides or, if they do, they will be shadows of their former selves
With the onset of the virus, office workers who have kept their jobs, have been required to work from home. Large numbers of city professionals in banking, accounting, law and other numerous services are working successfully from home in this new digital world. This will result in a systemic shift in office habits that was already underway before the crisis. The result will be downward pressure on office property values
As the government grapples with keeping the critically ill economy afloat, it is throwing money at the problem on a scale never seen before. It is doing this by effectively printing money which is euphemistically called quantitative easing. Printing money causes inflation. In this situation there becomes a point where keeping your investments in cash becomes costly because inflation is devaluing your cash. In this scenario the cash moves to quality assets. This means residential property and quality shares.
It could be the perfect storm. We saw an example of this after the GFC, residential property went through a boom. The GFC was a gentle breeze compared to this storm.
I think that lifestyle assets may perform even better as people look to create their own sanctuaries but generally, in my opinion I think the medium to long term outlook for residential is strong compared to all other asset classes.