As panic levels surrounding the coronavirus increase it would be remiss of me to not make mention of the potential impact it may have to our economy and property. Preppers are clearing supermarket shelves – in the UK it’s long life food supplies and water supplies. In the US they can’t get enough antiseptic wipes, soap and hand sanitiser. In Australia it’s apparently toilet paper…
So property-wise how is this likely to affect us? In our commentary two weeks ago I suggested in the second half of the year the property market will be geared closely to what is happening in the economy. The heightening concerns excaberate the likelihood of a weaker economy and therefore a potentially weaker property market.
In my opinion our economy will be impacted not so much by virus activity onshore, but more likely by how China responds to the threat. Today, China is Australia’s largest trading partner in terms of both imports and exports. Australia is China’s sixth largest trading partner; it is China’s fifth biggest supplier of imports and its tenth biggest customer for exports. Twenty-five per cent of Australia’s manufactured imports come from China; 13% of our exports are thermal coal to China. When China sneezes, Australia catches a cold, so economically we must expect a prolonged negative impact, although it may take some time before this is recognised locally.
The sharemarket has taken a battering in the past week, with RBA basically obligated to cut rates to a new record low of 0.5% on Tuesday. Some commentators are questioning the efficacy of a monetary response and it leaves the RBA with little room to move in the future should more economic stimulus be required.
That said, people still need a place to live and lack of stock on the market is continuing to drive prices higher in the current market – many of the sales we’re seeing are higher than 2017 prices now. Growth-wise property is still currently an outperforming sector and we’re not seeing any immediate negative impact from virus concerns.