JOHN MCGRATH

03/08/2020 | 3 MIN READ

The impact of COVID-19 on residential property values so far has been subdued compared to equities.

One reason is the lag effect of economic events on property because it’s an asset class that isn’t quickly and easily tradeable, like shares and most importantly, it provides a roof over our heads. 

A second reason is the $289 billion in stimulus helping businesses and individuals stay above water financially while we adjust to life with the virus.

For many people, the key impact of COVID-19 is job insecurity and reduced incomes, which affects their ability to keep up with loan repayments. 

When people can’t afford their repayments, their last resort is to sell.

Stimulus is currently preventing this from happening.

This supports home values by reducing the risk of oversupply.

When there are too many properties for sale at the one time, property prices will invariably slip.  

Let’s take a look at the major stimulus programs in place and how they are supporting home values. Many of these programs have been recently extended to give people more time and assistance.  

JobKeeper 

JobKeeper is currently supporting 960,000 businesses and more than 3.5 million individuals. It’s meant that home owners have been able to keep paying their mortgages.  

The most JobKeeper payments are going to NSW (33.1 per cent of JobKeeper payments to individuals), Victoria (27.8 per cent) and Queensland (19.7 per cent).  

Just 1.3 per cent of payments are going to ACT residents.

This is because so much of the territory’s employment is in the public service, so there is more job stability. 

Original end date: September 2020. New end date: March 2021 

JobSeeker 

JobSeeker is providing income replacement for those who have lost their jobs due to the virus.  

Original end date: September 2020. New end date: December 2020 

Early access to superannuation 

The ability to access up to $20,000 in super has given 3.6 million Australians extra funds to help cover the costs of life, including their mortgages, while unemployed or working less hours. 

Original end date: September 2020. New end date: December 2020 

Loan deferrals 

Housing is typically our biggest monthly expense, so the option to defer loan repayments for six months has helped people stay in their homes and given those in hardship time to sort out their finances.

As at mid-June, 485,000 loans had been deferred, according to the Australian Banking Association.

The deferral period has been extended by up to four months on a case-by-case basis.

Customers are able to re-structure their debt to reduce their repayments, with options including extending the length of the loan and converting to interest only terms. 

Original end date: September 2020. New end date: January 2021 

Help for small business 

ABS figures show 97per cent of Australian businesses are small to medium enterprises (SMEs) employing fewer than 20 people.

They don’t have the cash reserves of large firms, so they need more support. 

Amongst the help available is deferral of business loan repayments (also now extended by four months) and the 50 per cent government guarantee on new short-term loans (extended to June 2021).   

Helping small business means fewer people lose their jobs and more people can continue paying their home loans. 

HomeBuilder

HomeBuilder has had a stimulatory effect on the market, with 40,000 applications reportedly lodged so far.

It has increased sales of house and land packages and is also available for off-the-plan purchases where construction did not commence prior to June 4.

The price cap is $750,000. 

Original end date remains December 2020.

Big stamp duty breaks in NSW 

Last week, the NSW Government announced that stamp duty for first home buyers would be scrapped for purchases of new properties up to $800,000 and heavily discounted for purchases up to $1 million for the next 12 months.

On an $800,000 purchase, the saving is $31,335. 

This measure will support new property values by increasing demand, which is especially important in areas where a lot of new supply is nearing completion. 

End date: July 2021 

The views expressed in this article are an opinion only and readers should rely on their independent advice in relation to such matters. 

This article originally appeared in The Real Estate Conversation (August 3, 2020)