Hotspotting’s 24 March webinar on the impact for real estate from the coronavirus attracted record numbers of registrants – and many of them had questions.

Many asked about the wisdom of buying real estate in the current climate and others wanted answers to key concerns about mortgage stress or the ability of tenants to pay rent at a time of economic upheaval and rising unemployment.

Here we present some of the most common questions raised and our responses:-

Is now the time to be buying an investment property? Will there be tenants in the market?

This is a good time to be looking for an investment property. There will be opportunities to buy well in the current climate. Buyers will be able to negotiate from a position of strength. Just be careful to select a location with the credentials for long-term growth. There will be tenants – vacancies are low around the nation and the various government stimulus packages will assist people who might otherwise struggle to pay their rent.

Will this situation promote longer-term demographic shifts to more people working remotely and strengthen property growth in regional areas?

That is a trend already and has helped to drive the boom in the past 2-3 years in Regional Victoria, particularly in towns within 1-2 hours of Melbourne, and also in areas close to Sydney like the Central Coast. The current situation will probably enhance that trend towards people working remotely and therefore making lifestyle changes.

Auction clearance rates will change now that the first wave of lock-down controls come into effect. Will the market continue to be “healthy” amid rising unemployment?

Markets will continue to be healthy. Real estate has a strong track record of resilience in times of crisis. The rise in unemployment will be temporary – if it was long-term, extending right throughout the year, it would have a material impact on markets and property prices, but it is expected to be relatively short-term. Auctions will be curtailed by the government restrictions on gatherings, but most sales do not occur via auction so that in itself will not be detrimental to property prices. Only 10-11% of sales across Australian happen through auctions. It will cause some vendors who particularly want auctions to withdraw their properties from sale, which will exacerbate the shortage of listings and help to put a floor under property values.

Will vacancy rates rise in the short term with unemployment increasing?

There may be some increase in vacancy rates in the short-term, but mainly because owners who had been using AirBNB rather than permanent rental situations will now be seeking permanent tenants (because of the travel restrictions, which are killing the AirBNB market at the moment). Most markets should be able to absorb this, because vacancy rates are very low in most locations across Australia.

Do you have any perspectives on negotiating with developers during this time, especially as first home buyers.

Everything is negotiable at any time but in these turbulent times I suspect buyers will be able to negotiate favourable deals when buying new product from developers. It would be a good time to present yourself as a buyer at a time when many people will be standing back or sitting on the fence.

What should people do if they are struggling with their home loans?

Over the next few months if you find yourself unable to keep up with your loans, get on the front foot and call the credit provider early.  This will not only relieve some pressure as you won’t be living in fear of what they might do, but it will most likely help to protect your credit file in the process.  If the emotion is too close to home for you to liaise with the credit provider yourself, then engage a professional to do it for you. But check in early with your lenders.

The major lenders have made it clear that they want to help their mortgage customers, as well as businesses, because they have a strong vested interest in keeping their customers healthy. Anyone who is struggling with loan repayments should contact their lenders and work out a solution with them. The major banks are indicating that they will allow people to pause their repayments for a period of time.

If investors take advantage of 6 months loan interest deferral, is this likely to adversely impact credit rating or ability to refinance in the future?

APRA has told lenders that those who take a holiday will not be penalised on their credit file with this information.

What should landlords do if a tenant advises they can’t pay their rent?

It needs to be handled on a case-by-case basis. But a lot of the emphasis in the various stimulus packages is on assisting people in those situations. The benefits for people out of work have been significantly increased to try to avoid situations where people can’t pay their rent. But, for any landlords who fact that situation, work with your tenants, or your property manager, to come up with a solution – perhaps by reducing the rent for a short period.

Should we hold on to our savings and see how low the market will go?

That kind of strategy seldom works. It’s indicates a short-term viewpoint when real estate should be approached with long-term horizons. The other problem with that kind of approach is that it’s impossible to pinpoint the bottom of the market – the data that shows the bottom of the trough doesn’t appear until a long time after the event. A better approach is to look for good buying opportunities in the current circumstances in areas with the credentials for long-term growth.

Travel restrictions have severely reduced AirBNB bookings resulting in owners putting their properties on the normal rental market. Will this continue or will it be a short term blip.

This is expected to be a short-term situation. It’s entirely understandable that those who had previously used AirBNB will now be seeking permanent rentals. Markets, generally speaking, are well placed to absorb the extra rentals coming into the market, because vacancy rates are very low across Australia. All of the capital cities have vacancies below 3% and most are well below 2%. Most regional centres also have very tight rental markets.

My husband is very nervous and wants me to sell our family home.  What’s your advice on selling now?

No, please don’t do that. There is no need to panic to that degree. We are not going to see property values collapse and anyone who struggles to pay the mortgage during this crisis period should be able to arrange a suspension of their regular payments with their lender.

Should I reduce the rent before the tenants ask?

It may be a good strategy, to pre-empt any problems – perhaps offer a reduction in the rent for a short period to help get through the difficult period. It’s preferable to do that, rather than losing your tenant. I note that some landlords are doing that, according to media reports. But it needs to assessed on a case-by-case basis.

If I was to make an opportunistic buy, what’s to say I can rent it out in a timely manner in the current environment?

A sensible investor would, firstly, buy in a location where the vacancy rate is low (and most locations around the nation currently have low vacancies) and, secondly, speak to property managers in the local area about the prospects for renting the property you’re thinking of buying – before signing a contract.