THE UNKNOWN – PROPERTY AND 2021

The great pandemic of 2020 has created more questions than answers, I’d like to look at how it affects property.

We have seen the world brought to ground by the isolation and closing of borders.  In Australia we are in the enviable position of being an isolated country with a good government which has provided protection against this and potentially future 1 in 100 year pandemics.

By isolating ourselves and bringing home our traveling expats, we have created a cocooned economy that needs to become internally reliant.  With our wealth now circulating throughout our own borders, the economic impacts appear to be moderating.

I know that isolation will cause many areas within our economy to suffer through the next few years. Industries that have relied on overseas travellers and immigration continue to be hard hit, although there is some relief cushioned by the homegrown factor.

The Australian property industry has traditionally benefited in the past from immigration and overseas investment. There is evidence that it is now being supported by an increased demand from returning expats.  Together with lower interest rates and government incentives, there is strength in the residential property market for freehold houses and townhouses. 

The industrial property market is being strengthened through the new home-grown businesses. These are developing as result of the current uncertainties causing former employees moving into small business opportunities.

The office market in contrast, is suffering, as “work-from-home” has become an attractive option with increased vacant offices. It has created a balance of family/work-life for the employees and cost savings for the boss.  My view is that the full impact on the market, especially on institutions, investors and superannuation firms (who are major investors in this type of property), is still unclear .

Currently I can see that apartments and units are the hardest hit of all of the markets.  This sector is now suffering from years of over-development, poor construction, loss of immigration and the lack of overseas student demand.  It is likely that the volume of projects under construction and ready for commencement may result in subdued pricing over the next three years.  I am already seeing the cracks appear with many prominent apartment builders currently under the microscope.

The retail market, already suffering from the online shopping bonanza, has seen many smaller enterprises and shops closing through inefficiencies the pandemic has now highlighted.  How this sector will develop over the next few years remains unclear. 

The next two years require caution with a moderate sense of optimism.  The isolation of countries and economies should redistribute the real wealth on this planet. The new world has realised that it is not impervious to external threats, with a need to recede to a place of certainty and safety seen as valuable.  Globalisation and open economies have created problems outside our control making us reconsider our lifestyle choices. 

Australia controls so many resources including a food supply that can satisfy twice our population. This, together with ocean borders, results in a truly safe place to live. I consider Australia has the environment where the reliance on necessities does not need to be satisfied by other countries.

Much of our wealth lays in the property we own.  Our property is fast becoming the envy of many in the world, who now look at Australia as truly the lucky country.  I think this demand for security and safety has become more attractive as the world comes closer through travel times and the internet. 

I know from people around me that pandemic has change our lives. It has shown that most of us do not always need to leave home to be happy and productive. A balanced life can be truly, more enjoyable.