Guess what is the hottest topic in town lately? No doubt, it is the Covid-19 outbreak and the toilet paper madness. And up to today, all of us still uncertain what is the true motivation behind this stocking up “toilet paper” phenomenon but whoever has started the madness is certainly a powerful influencer, especially in the midst of worldwide panic. Interestingly, majority of the population still fall into this herd mentality without even thinking.
More than ever, real estate agents these days were bombarded with question like “how is the property market going now or how has COVID – 19 affecting the property price”? Ironically, early this year we were all celebrating as we have finally seen some hope of recovery in the property market, and the devastated East Coast bushfire and now the COVID-19 have changed the whole property outlook for 2020 completely. The full economic effects from COVID – 19 remain uncertain, the outlook seems gloomy, but is this the end of our “property market”? What are the majority doing now?
When come to investment of any kind, herd mentality is not an uncommon investing psychology. Most people will make decision based on what majority of the people said or would do, especially those who are close to them. Making a decision based solely on one’s emotion so they feel comfortable and avoiding being judged. Let’s face it, it is easier to become part of the herd, instead of going against it, it seems logical at time to avoid social pressure. Besides, most of us would also have the false sense of security that if larger group of people are doing it, the chance of being correct is higher. But are we making the best decision or the most profitable outcome for ourselves by following the crowd?
Undoubtedly, COVID – 19 will and have had substantial negative impacts on many facets of our life – employment, stock market, assets price etc. It will be a short, sharp shock to the economy we hope, but for property markets, the outcome has been a mixture of joy and grief. Some sellers are entering into panic selling mode, and some buyers are holding back. Some buyers managed to score a bargain and some seller decided to pull back the listing. Hence slow down the momentum of the market and transactions activity will drop. Not everyone is on the same position though. For buyers who are in a better position at this current situation, those who have secure jobs and deposit, they are on the upper hand to enter and negotiate a good deal as the overall market is weaker. The smartest investor will despite the herd mentality and is not afraid to take action when a good deal arises. For our seller, expect things are going to be slower and weaker.
Unlike other asset types, brick and mortar is foremost a shelter and a basic necessity of life. Whatever happens over the coming weeks, months or even years, property will always hold relative value as an asset class if you buy and hold for long enough. No one can possibly accurately predict the effect of the COVID-19 on any industry. Leaning on experiences and lessons we learnt from previous crises like 9-11, SARS and the GFC, economy will recover, people will recuperate. The RBA predicted economy will rebound in the second half of this year and we hope RBA is right, if not we would expect a rebound the least by 2021. Either way, it’s important to remember that things will get better, and we will go back to our normal life again eventually, where hand shaking and pat on a shoulder is a nice gesture to greet each other, or even a hug.
So, is it a good time to transact now? Take some time to assess your own position, and pay attention to who you are listening to, you will be surprised by what you find. Maybe you can avoid falling into the herd mentality altogether if you are brave enough to do something different. Do your own research, make your decision based on factual data and consult an advisor. Someone who has a remarkable tract record, who can give you a better advice than your amateur neighbours or the lady who works in the café down in your street.
For more information on strategic property investment, call IQI WA at 041 554 7878 or email us at [email protected].