By Herron Todd White
May 2020

It feels like after weeks of uncertainty, apprehension and anxiety, we have reached a point of acceptance and reality with the COVID-19 pandemic. At the time of writing, South Australia had 437 known cases of COVID-19 with 376 of those now recovered. Case numbers have reduced with only one case being reported over a five-day period in the third week of April. Comparatively South Australia sits fifth in infection rates of all states and territories and looks to be tracking positively in the fight against COVID-19.

Our day to day operations have had to evolve quickly and adapt as lockdowns and social distancing measures were implemented. The aim of these measures is to keep social interactions outside of immediate family to an absolute minimum. If all members of a household are abiding by social distancing measures, the family home is a safe space from COVID-19.

This has created a conundrum for the valuation industry as internal access and visual inspection of the family home is integral to the job. When booking appointments, job coordinators are now asking questions specific to COVID-19 and any recent travel by the occupants. Additionally, occupants are asked to have all doors open and lights turned on to ensure that the valuer avoids contact with surfaces. The job coordinator’s role is integral as the questioning alleviates anxiety for both parties to the inspection. The valuer is comfortable the occupant has been abiding by federal government protocols and the occupant is comfortable that the valuer is making all efforts to avoid contact with surfaces and abiding by social distancing during the inspection.

On the back of the cash rate reduction in late March, positivity remained in the market. We continued to see settlements of properties purchase pre-COVID-19 and listings hitting the market prior to the social distancing and lockdown measures being implemented. The market was spooked on the back of the stage 2 lockdown measures implemented in late March which led to mass business closures. As at March 2020, the seasonally adjusted unemployment rate for South Australia was 6.2 percent, which is the highest in the country. Given what has played out throughout April, it’s expected that this figure will rise. Additionally there are many businesses that have remained operational however at a reduced capacity with employees working reduced hours or forced to take leave, so not only do we have unemployment, but we have under employment. These labour market factors do not spell confidence in the local property market.

Both the state and federal governments have been active in their endeavours to cushion the fallout from the lockdown restrictions, offering a raft of care packages. The federal packages have been well publicised while locally the state government has announced a $10,000 cash grant for small businesses that have suffered a loss of income or closed due to COVID-19 restrictions. Additionally, a $5.7 million stimulus package has been announced to aid tourism operators who are still reeling from the devastating summer bushfires.

The most recent available data has not indicated a reduction in price levels. Clearance rates are hovering around 30 percent, which is consistent with the same period in 2019, however the volume of properties taken to auction has reduced. Additionally the volume in properties coming to the market has dropped sharply, down nearly 40 percent on the same time last year. This is a reflection on the functionality of the property market as vendors are not willing to take properties to market when they don’t have the option of auction and have the ability for only single person open inspection. Interestingly, agents have indicated that the restrictions on open inspections have created a dynamic where only motivated vendors and purchasers are active, creating greater transparency in the sales process.

The banning of public auctions hindered the markets and property types which have a greater level of reliance on this method of sale. The $750,000 to $1.25 million price bracket in the inner and middle rings has historically been popular for sale by auction. The recent listing of 11 George Street, Parkside with an advertised price of $1 million falls into this category, having all the attributes of a property that would benefit from this method of sale. It’s expected that typical auction properties will continue to come to market, however at a lower volume.

The investor market has also been drastically affected on the back of state government measures. Measures have been announced which prevent landlords from increasing rents and prevent eviction of tenants for non-payment of rent due to distress as a result of COVID-19. These factors are considered to be a deterrent for market entry in the short term. The middle and outer rings are considered most popular with investors, most active in the $150,000 to $350,000 price bracket.

Fitting the bill of typical investor stock is 181 Newton Boulevard, Munno Para. This property was offered on the market in early March and contracted in two weeks slightly below the asking price for $258,000. Being offered to the market and selling with a limited marketing period in the shadow of COVID-19 is an indication that there are still some buyers active in this market.

In the event of a broad market downturn, the lifestyle property market can be the first to show signs of slowing. Properties in this market are typically regionally located, are vacant for six months of the year and are non-income generating. When the belt has to be tightened, these properties are not considered essential and are the first to be offered to the market. Regions such as Yorke Peninsula, Fleurieu Peninsula and the Mid Murray are considered to have a high proportion of lifestyle properties. Price points for these properties fluctuate drastically depending on region, access to facilities and proximity to water. Price points begin at $125,000 for a basic Yorke Peninsula coastal shack to $1.75 million for a Fleurieu Peninsula waterfront, high-quality beach house. So where do we go from here? Rising unemployment, broad labour market underemployment, banning of auctions and limited open inspections do not equate to market positivity. The prospects of market growth following the trajectory seen in the first quarter of 2020 is unlikely. Motivated vendors and purchasers will see activity remain in the market, however at a lower level of sales volume and price levels to trend downwards over the short term. The COVID-19 situation is fluid and changing rapidly, making it difficult to gauge the long term effects on the broad market. It appears that the lockdown restrictions will be eased in stages over an extended period of time. The longer the lockdown goes on, the longer the recovery may be.

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