First-Home Buyers diving into the market despite COVID-19 crisis…

Mitchell Kelly scored himself a bargain as a first-home buyer dipping his toe into the market during the coronavirus pandemic.

Kelly has just picked up a four-bedroom, two-bathroom townhouse in Scarborough, a beachside suburb of Perth, for $545,000. The same property was on the market earlier in the year for $700,000.

Although he does concede that the property needs some work.

Before buying, Kelly, who had previously been renting, had been looking for a property to buy for six months. “I was outbid on a place in January,” he said. “Then six weeks ago I found the place I ended up buying just when the federal government shut everything down.”

He described the vendor as motivated.

Up until that point Kelly hadn’t even factored the COVID-19 pandemic into his thinking about buying a property. “Then I started second-guessing myself as to whether it was the right thing to do to buy something or hang back for six months and see where the market goes.”

Despite the virus, he took the view it was a good time to buy, as any fall in property prices would be temporary and buying property required a long-term investment horizon.

“I also found a place I liked and it was a good price,” he said. “Based on everything I saw, it was the best place I’d looked at in six months.”

Domain economist Trent Wiltshire says it’s too early to tell how much prices have come off for the average first-home buyer, but the market has clearly trended down.

“Prices peaked around February and since then they have fallen by about 5 per cent to 10 per cent on average. That varies across suburbs and capital cities,” Wiltshire says.

“More vendors are taking some money off the asking price. But it’s another question whether prices have bottomed.

“The outlook has improved over the past few weeks as we’ve made good progress containing the virus and with the economy reopening.

“But although it’s looking more positive, prices won’t necessarily rebound rapidly. It’s more likely they’ve still got a little bit further to fall, but not too much. That’s the base case,” he adds.

Auction conditions have improved after open for inspections and in-person auctions started up again. Recent weekends delivered the best auction clearance rate since on-site auctions were banned.

“Signs have improved a bit and the outlook is better than it was,” Wiltshire said. “But a lot of people are out of work or working reduced hours. So people’s income has taken a hit and that’s going to be the case for a number of months, even if things do improve quite rapidly.”

The big risk to the outlook is another outbreak or multiple outbreaks, and a subsequent shutdown.

“That will have a big impact on consumer and business confidence and we might see prices fall further,” Wiltshire said. “So we’re definitely not out of the woods. But the news is a little more positive. Prices are still going to be soft for a while, so there’ll still opportunities out there for buyers.”

First-home buyers were particularly active before the crisis thanks to the federal government’s first-home loan deposit scheme. The proportion of first-home buyers in the context of all home loan approvals for owner-occupied dwellings in March was 29.3 per cent, the highest it has been since 2010.

But given young people have been some of the hardest hit by shutdowns, with many employed in sectors such as hospitality, retail and entertainment, it’s possible this trend will reverse.

Nevertheless, real estate agents report more inquiries from first-home buyers given the dip in property prices and cuts to interest rates.

Couples with dual incomes and job security are finding low interest rates mean repayments are close to or similar to paying rent, making it affordable to buy their first home.

“They are realistic and looking for property they can move into that offers the opportunity to add value in the future.”

First-home buyers may also be able to get into the market by acquiring properties from distressed sellers willing to lower their prices.

“There will be some good buys due to some home owners being in financial distress and needing to sell. But this is on a case-by-case basis and not something that is happening widely across the nation”

Kelly is extremely pleased with his purchase. “At the end of the day, the market will recover, whether it takes 12 months or longer. I certainly didn’t want to put my life off for a year or more, so I’m glad I bought now.”

 

NSW to lift bans on open homes and on-site auctions in move expected to boost market

Concessions allowing homebuyers to return to open for inspections and on-site auctions will give the real estate market a much-needed boost, property experts claim.

The relaxed restrictions announced as part of government measures to kickstart the NSW economy will permit homebuyers to attend open homes and on-site auctions from next weekend.

Buyers had been limited to viewing properties by private inspection only and auctions were being conducted online due to social distancing measures enforced in mid-March.

Treasurer Dominic Perrottet announced the restrictions will be lifted after nearly six weeks with strict health guidelines in place.

These include limits to the number of people allowed to attend inspections and auctions, along with physical distancing requirements.

Hand sanitiser will be mandatory and stringent cleaning of properties will be required. Those with symptoms of illness will be barred from attending inspections or auctions.

 Agents will also be required to keep records of those attending in case contact tracing is needed.

The announcements came as CoreLogic data showed Sydney’s auction clearance rate bounced back up to 63 per cent this week after being below 40 per cent for much of April. Meanwhile, new listings activity slumped last week to about half what it was in March.

Real Estate Institute of NSW chief executive Tim McKibbin said the new concessions would give the industry a boost and help sure up confidence in the sector.

“The market has been severely impacted by COVID-19 in the sense it has frozen … activity has been in hibernation,” he said. “Relaxing (the restrictions) could mean stronger competition for property.”

Surry Hills home auction

Agents will need to limit attendance at auctions.


Cooley Auctions founder Damien Cooley said the lift on restrictions may encourage vendors to convert private treaty sales into auction.

This would push up auction volumes in the coming weeks, Mr Cooley said. “The industry had been embracing online auctions and sellers were getting some strong results but the return to face-to-face interactions will make a difference,” he said.

A key impact will be on agents’ ability to market properties, since they will no longer be required to host time-intensive private inspections, Mr Cooley added.

“It was incredibly difficult for agents to do private inspections,” he said.

Supplied Editorial Ray White, Geelong agent Laurie McGovan conducts the online auction
 of 24 Western Beach Rd, Geelong on Saturday.

Auctions had been conducted in sales offices with bidding done online over recent weeks.


Under the new health guidelines, agents will be encouraged to limit the number of people attending inspections, but Mr Cooley said the simplest way to do this would be restricting attendance to registered bidders only. “Agents will have to discourage spectators,” he said.

Treasurer Dominic Perrottet said the relaxing of restrictions was a sign of the ongoing success in limiting the spread of COVID-19.

Some vendors with private treaty sales may convert them to auction sales.


“When it comes to this change, a simple home truth is to leave the house hunting to the genuine buyers and sellers and avoid overcrowding,” Mr Perrottet said.

Health Minister Brad Hazzard urged real estate agents and the community to take care when face-to-face inspections and auctions resumed.

“The community has done an outstanding job in limiting the spread of COVID-19 and we need to make sure we continue to exercise vigilance,” he said.

Realtor outside home for sale with real estate sign.

Having to do private inspections only was crippling some agents’ ability to sell real estate.


Mr McKibbin said the relaxing of property restrictions meant home sales would be governed by similar rules to those in place in the retail industry.

“The concession is not all that different from what is in place for attending Bunnings or Coles or going on public transport … it reflects how important real estate is for the economy.”