COVID-19 offers lifestyle opportunities for owner-occupiers

WHILE it has impacted Australian lives dramatically, one silver lining of the coronavirus pandemic is the opportunity it is now offering owner-occupiers, particularly first homebuyers.

RiskWise Property Research CEO Doron Peleg said COVID-19 had helped strengthen ‘work from home’ opportunities meaning owner-occupiers could take advantage of ‘lifestyle’ prospects instead of being tied to employment hubs.

“While there’s nothing new about mobile professionals, the onset of COVID-19 changed the way we work as a nation with vastly increasing numbers working from home - and it’s here to stay,” Mr Peleg said.

Pete Wargent, co-founder of Buyers Buyers, a national marketplace offering affordable buyer’s agency services to all Australians, said lifestyle buyers were out in force.

“Those who work in a stable corporate environment, but do so remotely, are now taking advantage of great buying opportunities in NSW, Victoria and South East Queensland," Mr Wargent said.

“Before COVID-19 hit, there was already a strong trend of sea- and tree-change homebuyers looking for the best of all worlds – lifestyle, accessibility to employment hubs and affordable housing” he said.

RiskWise Property Research has summarised the key locations experiencing this trend.

Mr Peleg of RiskWise said, “These include areas of South East Queensland such as the Sunshine Coast and the Gold Coast, just over the NSW border in Byron Bay and further south on the Central Coast, in areas such as North Avoca, Terrigal and Wamberal. Then there’s also sought-after locations such as the Hunter Valley, Wollongong and the South Coast, and in Victoria, the Mornington Peninsula, Geelong and Ballarat.”

Mr Peleg said beachside suburbs especially outperformed the market as they offered such fantastic lifestyle opportunities.

As RiskWise reported in November 2019, there is a clear trend regarding their popularity and potential for capital growth as outlined in research it undertook on the Top 10 Suburbs to Retire and Build Equity.

He said even in Sydney, for example, despite COVID-19, and previous events such as the credit restrictions by APRA, scrutinising of loan applications as a result of the Royal Commission and material price reductions until the election results in May 2019, houses simply enjoyed strong demand with the chronic undersupply ensuring solid capital growth.

“The average holding period of houses in Sydney, that in 75.9 percent of cases belong to owner-occupiers, is 12.2 years. This means owner-occupiers with secure jobs and no serviceability issues are not impacted by short-term market movements, unless they need to re-finance,” Mr Peleg said.

He said the Sydney property market, had delivered solid capital growth of 22 percent in the past five years and houses in popular areas delivered much stronger capital growth during that period. For example, houses in Paddington experienced price increase of 56 percent and in St Peters houses saw capital growth of 51 percent during that period.

“Home buyers with long-term holding strategies were well positioned to negotiate aggressively to purchase high-quality houses that usually enjoyed very strong demand,” he said.

While Sydney is a good case study, houses in Greater Melbourne delivered even stronger capital growth of 38 percent during the past five years.  

Strong demand for houses has also resulted in strong capital growth in the Sunshine Coast and the Gold Coast with 28.4 percent and 26 percent, respectively.

Working remotely an accelerating phenomenon

In 2016 the Australian Bureau of Statistics reported almost a third (3.5 million) of all employed Australians regularly worked from home. Since the onset of COVID-19, this number has skyrocketed.

In March a Gartner survey showed 88 percent of Australian organisations have adopted working from home as part of their coronavirus response many to cut costs during the pandemic by focusing on “effective use of technology (cited by 70 percent of respondents) and freezing new hiring”.

“While many organisations were using remote working to improve productivity and the attractiveness of workplaces to entice the best talent, reduce office costs and reduce international and intrastate travel prior to the onset of COVID-19, it has now become an accelerated phenomenon with offices across large cities trying to minimise face-to-face meetings that required commuting," the Gartner report said.

“Interestingly, since COVID-19 and the increase in remote working there has actually been an improvement in productivity.”

The Gartner survey said 49 percent of respondents said they had been more productive during the time they would normally spend commuting to work, 36 percent were less stressed and 32 percent were better able to concentrate as they were not distracted by colleagues.

Office vacancy rates are a clear sign of how the pandemic has affected employment. According to the latest Property Council of Australia's Office Market Report, Sydney’s has almost doubled from 3.9 percent to 5.6 percent for the six months to the end of July while in the Melbourne CBD it rose from 3.2 percent to 5.9 percent.

“While there was definitely uncertainty during the first wave of the pandemic, the second wave shows us quite clearly these new work practices are here to say most likely until end of 2020 and well into 2021,” the report said.

“Therefore, the demand for regional areas offering great lifestyle choices is likely to further increase among those with stable incomes.”

There are also several other incentives that put home buyers and especially first home buyers in an enviable position. These include Federal Government programs such as the First Home Buyers Deposit Scheme whereby a deposit of just a 5 percent deposit can be used to enter the property market and the avoidance of Lenders Mortgage Insurance (LMI), as well as stamp duty exemptions.

“Lower interest rates also materially improve housing affordability in terms of serviceability ratio, i.e. the monthly repayments for any price point are simply lower,” Mr Peleg said.

“What this all means is now is the time to buy if you are a first home buyer or an owner-occupier as this current slowdown in the property market is only temporary, with houses in popular areas likely to experience solid capital growth in the medium to long term.

“Once the COVID-19 issue is resolved, most likely in 2021, the traditional connection between low interest rates and increase in dwelling prices is likely to take place.”

He stressed, however, that investors buying rental apartments unsuitable for families were taking an enormous gamble, with both equity and cash flow risk expected to materially increase. Serviceability is also a major factor for investors who rely on a stable rental income to cover the costs associated with property and particularly the mortgage.

Pete Wargent of Buyers Buyers said navigating the current market conditions was challenging but understanding the nuances of the local market and negotiating accordingly on price and terms was the key.

“If you negotiate well, you can secure a very good property and manage the risk of lower prices in the short term by simply paying less,” he said.

Rich Harvey, Buyers Agent and CEO of propertybuyer.com.au said the pre-spring and spring market would supply a range of opportunities for buyers to consider getting a better foothold in the market as listing volumes started to rise.

“With the onset of COVID-19, areas such as the Sutherland Shire, Inner West and Inner South West, that were showing good promise have paused their strong growth trajectory and now represent good value for buyers,” he said.

“The traditionally strong markets of Eastern suburbs, Northern Beaches and North Shore are also giving buyers the chance to get in for lower prices than last year.”

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