2020 could be the right time to buy property in Australia

2020 might not seem like the right time to make any big property investments. After all, the global economy is in utter turmoil and many key markets have fallen off a cliff. This is why investors are turning to safe havens like gold and bonds.

Yet, this opens up the tantalising possibility of taking advantage of low prices while most other people are afraid to spend or don’t have the resources to do so. One example worth taking a look at is the Australian property market.

The background

Home ownership in Australia has been stable over the long term but has fallen to historically low levels in recent years. From 70% in the mid-60s, it fell to 67% in 2016. The idea of owning a property is still important to Australians, so this trend implies that it is becoming too expensive for more of them to do so.

It is a highly attractive country for foreign investors, especially Brits who see a similar culture and language to their own, but with a better climate. Property prices in Australia have been high, though, meaning that it isn’t a cheap investment.     

There are also some restrictions in buying a home here, with the Foreign Investment Review Board having to approve the transaction. It is perhaps best suited to someone who plans to start a new life Down Under, although you can choose to buy a new-build home as an investment.

Where can we expect prices to go in 2020?

Property prices in Australia ended 2019 on a high, with a 2.3% rise over the year. At the time of writing, the market freeze makes it almost impossible to understand how the coronavirus lockdown has affected the housing market here.

However, Louis Christopher of SQM research is quoted as predicting a fall of up to 30%, regardless of when life goes back to normal. He expects Sydney and Melbourne to be hardest hit, with the exact details depending upon when restrictions are eased.

The fact that these major cities rely so heavily on internal tourism and trade means that they are most exposed. CBA predicted a 20% drop in prices in the main cities, which is the same figure mentioned by AMP Capital chief economist Shane Oliver.

Yet, the truth is that no one really knows how deep the financial crisis will run. Unemployment in Australia is set for a 25-year high, as close to 1.5 workers are set to lose their jobs. This will greatly reduce the number of buyers in the market.

The long term outlook is bright

This is a time for looking at the long term future of your investments rather than panicking over short term drops. Is Australia likely to be an attractive place to live or to let out property in 5, 10 or 20 years’ time? It almost certainly will be.

Once the coronavirus impact has passed – as it surely will sooner or later – the foundations of a strong economy and enviable place to live will remain firmly in place in Australia. This means that we can expect the housing market to bounce back sooner or later.

Any type of investment in 2020 will have a degree of risk built into it because of the uncertainty that we can all feel in the air. However, in times of uncertainty a bricks and mortar investment in a desirable location is rarely a bad move.