As we are probably well aware by now, the Covid-19 Coronavirus is currently taking the world by storm in an economic crisis. The impact of the Coronavirus on the Australian economy and property market is still yet to be fully measured, however, here are a couple of points on the overall facts of the Coronavirus and how we think the next few months will shape up:
The Covid-19 virus outbreak originated from Wuhan, China in December 2019. To date, there are 8,900+ deaths and 200,000+ infected cases across 162 countries
The virus has caused panic to the global economy, disrupting the global supply chain and refraining people from doing what they normally do like shopping, eating out and traveling
The major stock markets including the U.S, Euro, Asia, and Australia experienced the deepest downturns since the Global Financial Crisis in 2008
The Australian dollar has slipped to a 18-year low and now measures at US 56c
Due to the infectious nature of the virus, people try to minimise human to human contact through social distancing which directly affects the key sectors of the economy: tourism, education, travel, hospitality
The travel restrictions in Australia, U.S.A, China, and Euro further exacerbate the panic for consumers and businesses: businesses may delay planned new hires and investment in equipment; consumers will, therefore, be worried about their job security so they cut their spending
The Australian economy is even more vulnerable to the impact of the virus due to the high proportion of services sectors in the economy. It is likely that the economy will enter negative growth territory in the coming months. The reason is that businesses and consumers will not be willing to spend whilst plagued with uncertainty
However, the virus will most likely alter from its current course over the next few months, as people will likely adapt to it like influenza. In fact, health data shows that the majority of infected people will be asymptomatic or only display a few symptoms, and only a small percentage will require medical attention
In the next three to six months, it is likely that the economy will slow down, the unemployment rate will rise and household income will drop
Once the virus is over and confidence is restored, the federal government will step in to inject cash to the economy to increase consumer spending
The tourism sector will gradually recover in part due to the return of Chinese tourists. The education sector will return to normal operation as overseas students, mainly Chinese students will return
Due to the economic downturn, it is expected that the housing market will be negatively affected in the short-term. However, historical data shows that downturn episodes are usually followed by quick recoveries to the long-term trend
The reason is that the Australian housing market is relatively small compared to other markets in the U.S and Euro (Sydney and Melbourne each have only five million people), therefore, it takes a short time to turnaround due to demand from high population growth at 1.7%/year, three times of the U.S and Euro
The next three to six months will be a window of opportunity to purchase properties below the long-term market value before a speed recovery.
Sydney House Prices ($000)
Cumulative Growth (%)
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