REIQ has been a major industry leader in terms of the property market, and specifically news, training and information relating to the property market in QLD for as long as we can remember.
One of their most recent blogs covers why Property is a sturdy Investment during the Coronavirus pandemic. We’ve taken the liberty of extracting some of this information below, for the full blog – click here.
Why property stands sturdy as coronavirus smashes stock markets
History has shown when there are corrections in global stock markets, Australian property becomes a port in the storm.
As the stock market is ravaged by fears of coronavirus and the Australian dollar dips to its lowest levels in many years, Mark Williams of WILLIAMS MEDIA ponders the reactions of previous disasters. “This week we have seen a flow of capital to property,” said Mr Williams. “Property has become a safe haven in the past whenever there is a stock market correction. We saw this in the recession of 1987, the Asia crisis of 1997 and the Global Financial Crisis in 2008.”
Mr Williams said indications this week showed that people were again moving their money to property when stock markets suffer significant corrections. “In the past three days we have seen significant competition with above reserve results reported for both residential and commercial properties nationally. A record residential price in excess of $13m was achieved in the Brisbane suburb of Ascot,” said Mr Williams.
“Property buyers have access to the cheapest money in our history as interest rates to borrow are so low,” continued Mr Williams. “Historically we have entered stock market corrections when interest rates have been high and people would move their money into banks chasing yields. With rates so low during this correction, there is no return on money by moving it into cash accounts.”
Mr Williams said the banking system has been strong in the past and there’s confidence the Government has the banking sectors’ and economy’s back. “To be able to deposit money and borrow from these institutions with confidence is key” explained Mr Williams. “Smart Investors realise a strong banking system can be equally important to borrowers to protect their equity and debt stability as much as their deposits. Yield is also a big attraction for real estate investment especially with interest rates at historic lows.”
Mr Williams further highlighted that commercial yields ranging from 2-9% net are very attractive when secured by hard assets like real estate. As a result, yields may be pushed lower so investors should be cautious to select their tenant and sector risk wisely and ensure they are comfortable with their chosen risk profile which is usually market reflected in the net yield.
“A financially sound tenant one month ago may not be a sound one today, but prime property is always going to be prime property and will always invoke strong demand,” said Mr Williams.
Williams further said we should start to see strong competition for tenants who are health-based such as pharmacies and doctors, prime retail, office and especially industrial warehousing and logistics on the back of tech-based businesses. He also sees strong demand from commercial owner/occupiers investing in hard assets to occupy their business particularly when interest rates are far cheaper than renting in most situations.
With the challenge of coronavirus for the real estate industry, Mr Williams said the use of technology was going to be the point of difference. “Change has been forced upon the sector overnight and smarter agents are utilising this period of change by upgrading their systems to use technology to its full capacity,” added Mr Williams. “On the other side of COVID-19 we will see real estate practices being much more efficient through the adoption of PropTech.”