Coronavirus has sparked fear and concern across the world as the deadly disease spreads rapidly. Other than immediate health concerns, Novel Coronavirus has had detrimental impacts on more than just our health. The virus has resulted in travel bans, ruined holiday plans and business trips, caused racist and insensitive attacks and damaged restaurant businesses. It is expected to hit the Australian property market as well. So far, a total of 26 confirmed cases have been identified in our nation. After Australia has already endured an unprecedented and devastating fire season, the market is expected to continue to suffer as a result of this global epidemic.
What is Coronavirus?
On a broad notion, Coronavirus is a family of pathogens. These can range in severity to symptoms similar to that of a common cold or more serious effects, such as severe respiratory problems. The strain of Coronavirus that originated in Wuhan, China, has proven more deadly than several previous forms of the virus. Novel Coronavirus, so far, has killed almost 3000 people, and this number is expected to continue to rise. A further 87, 000 people have tested positive for Novel Coronavirus forcing the World Health Organisation (WHO) to declare it a global health emergency.
How did the Australian Government React to Novel Coronavirus?
In February, the Australian Government imposed a travel ban for Chinese nationals to Australia. This ban was not extended to Australian citizens returning to the country, permanent residents, immediate family or spouses. The Federal Government also released a level four no travel caution for individuals planning to travel to China, whether for vacation or work. Many airlines, in turn, also cancelled flights that were scheduled to arrive in mainland China.
How did the 2019-2020 Australian Bushfire Crisis Affect the Property Market?
The Australian property market already suffered a blow from the 2019-2020 Australian bushfire crisis. Since September, a total of 11 million hectares of land have been destroyed. Over 3000 homes were destroyed in New South Wales, Queensland, the Australian Capital Territory and South Australia. The death toll reached 29 lives lost, and billions of animals have also perished in the blazes.
Although there has been much financial support through donations, from both Australian and overseas citizens and businesses, there is still a long road to recovery. Over 500 million dollars have been raised so far, but the fires will continue to affect many businesses and industries into the future. Property prices, as well as listings, have plummeted in several areas following the fires. This particularly includes regions of country Victoria and regional New South Wales. These lower property prices are expected to last for at least another 12 months. This is because these areas will now be perceived as high-risk areas or unattractive. Listings will decrease in the short-term as it would be a poor time for people to sell.
How will Coronavirus Affect an Already Fragile Nation?
The outbreak of Novel Coronavirus is expected to further influence the Australian economy. The Federal Treasurer, Josh Frydenberg, confirmed this stating that it will have a ‘significant impact’. Australia heavily relies on financial transactions such as Chinese export revenue and revenue from Chinese tourists and students. The travel ban imposed on Chinese nationals will inevitably see a decline in profits for the tourism industry.
The travel ban also impacted international students. Chinese international students were supposed to commence their studies at the beginning of this year. Of the 200, 000 students, half were not able to enter Australia. This impacts university revenue and revenue from student accommodation. The longer the travel ban remains, the larger the effects will be on the rental property sector.
More widely, a lack of Chinese tourism, Australia’s biggest international tourist sector, will impact businesses such as restaurants and licensed venues, accommodation and hotel companies and retail businesses. A total revenue loss of $2.3 billion has been predicted from the travel ban imposed. Additionally, China is Australia’s biggest export market. It currently generates over $93 billion annually in revenue for our nation. The downturn in the Chinese economy due to the outbreak of Novel Coronavirus will affect exports such as coal and iron ore due to a decrease in demand.
How Will the Property Market Hold Up?
As the Australian property market is affected by the overall position of the Australian economy, it is unavoidable that the market will be impacted by the flow-on effects of the economic impacts of Novel Coronavirus. Some negative impacts include that less Chinese students coming to Australia will result in a decreased demand for student accommodation and rental properties. There may also be a decrease in Chinese investors buying a property in Australia, as they are restricted from entering the country to check out property markets. Furthermore, the Chinese Government may restrict their flow of funds to the nation, which will decrease the buying power of Chinese investors.
The impacts are not all bad, though. There are some positive impacts on the Australian property market that the outbreak of Novel Coronavirus could potentially produce. Demand from overseas buyers, including Chinese nationals, could actually increase. During an unstable economic period, property is often seen as a safer investment as opposed to the share market, for example. Individuals may trade their stocks to buy into the property market. This notion also applies to local buyers.
Additionally, interest rates in Australia may be cut again by the Reserve Bank of Australia. Already at a record low, if the economy starts to slow down as a result of Novel Coronavirus, this could be actioned. With lower interest rates, the demand for property increases.
So What is Going to Happen?
At the end of the day, only time will tell how much the outbreak of Novel Coronavirus will affect the Australian property market. As the property market is closely aligned with the overall state of the economy, government decisions will impact how the market will be affected. Individuals that are considering buying or selling property in this current market must ensure that they stay informed with up to date information.