Should You Delay Purchasing a Home Due to COVID-19?

By June 2, 2020Uncategorized

The unprecedented event of COVID-19 has caused upheaval and uncertainty for many Australians, particularly with the loss of jobs or reducing income. But should you put off big purchases such as a home during this time?

COVID-19 and the economy

Although the extent of COVID-19’s impact on Australia’s economy is not yet known, it’s clear there has been a financial impact across the board. April’s labour force statistics showed a loss of 600,000 jobs and an unemployment rate of 6.2%[1]. This number did not include the total of those unemployed due to COVID-19 restrictions (9.6% if counted).

Anecdotally, many Australians have also taken up the various offers from banks to defer mortgage payments or received Government support during this time. But what does this mean for the general economy? Australia’s Treasury Secretary, Steven Kennedy, recently said that Australia was looking “pretty good” among the rest of the world who had faced a large level of disruption[2].

Australia’s Prime Minister has numerous times, acknowledged the impact of COVID-19 on Australians from a financial standpoint and has consistently worked on plans to roll out Government assistance packages for individuals and businesses.

The housing market during crises

With all of this financial uncertainty, how is the housing market faring, and how does any form of crises impact potential buyers? In the past, Australia’s property market has faced global crises and rebounded reasonably well. For example, the 1987 Black Monday sharemarket crash which encouraged a move from purchasing shares to property; the recessions in the 80s and 90s saw housing prices drop as unemployment rose; the GFC also saw a fall in property prices.

With job and financial security big factors for purchasing property, this is key for how the market will fare during COVID-19 and the subsequent fallout.

There has already been speculation that housing prices will drop due to the fallout of COVID-19 but this has not yet been seen on a large scale. However, auctions were canceled during the initial stages of lockdown, which inevitably would have impacted many sellers and buyers. This has recently been opened up as stage one of restriction ease in several states and territories. Time will tell whether property prices will drop short or long term, but it should be noted that oftentimes the property market is slower to react than the sharemarket, due to its’ reliability on employment rates rather than investors.

To buy or not to buy?

Purchasing during or post-COVID-19 is a very personal decision, which should be based on your current financial situation. Keeping an eye on the market is also key, noting that a reduction in property value could see a buyer’s market and provide a great time to purchase. The key for potential property buyers is to be fully informed of your options and what is happening in the market.

The top three considerations during this time should be:

  1. Your financial situation:
  • Are you secure in your job or have you reduced hours?
  • Do you have a full deposit available to make purchasing easier?
  • Is your credit rating solid?
  1. Your need to purchase:
  • Do you need to purchase now?
  • Can you delay purchasing?
  • Is it in your best interest to jump into the market should property prices go down?
  1. Your access to good advice:
  • Have you engaged a good mortgage broker?
  • Do you have a contact at your choice of bank?
  • Are you regularly speaking with your bank and your mortgage broker?

Ultimately, the best people to speak to about purchasing property and your options are experienced mortgage brokers with years of experience in the market. They will be best placed to advise you on the state of the property market, your personal finances, your options for purchase and other key considerations.

To gain access to mortgage experts with decades of experience, contact Lending Specialists today.

[1] Australian Bureau of Statistics (2020) 6202.0 Labour Force, Australia, Apr 2020. Released 11.30am, 14 May 2020.

[2] Karp, P. (2020). Australia’s Treasury Chief says government should worry about jobs and not rising debt during coronavirus crisis. Published in The Guardian newspaper, online, Thursday 21 May 2020.

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