The Australian property market is affected by the state of the Australian economy. So, if the economy is affected by the coronavirus, there will naturally be a flow-on effect for the property market.
It is likely, in my opinion, there will be short-term pain for apartment developments with exposure to offshore investors, as well as for landlords relying on foreign students to fill vacancies.
There’s also a possibility of cheaper rents for the city’s most affordable apartments if international students are unable to leave quarantine zones overseas. Also, if China continues to restrict the flow of funds out of their country to protect their own economy, it limits the ability of Chinese investors to buy property in Australia.
Chinese visitors are easily Australia’s largest international tourism market. If Chinese tourist numbers fall (as seems likely) the flow on effect will also be felt in businesses like retail, restaurants and accommodation. With potential lower wages or higher unemployment property will become less affordable.
China is also Australia’s largest export market, currently generating over $93 billion in annual revenue for the Australian economy! Any downturn in the Chinese economy due to the impacts of Coronavirus will hurt the demand for Australian commodity exports, and I don’t mean toilet paper, like iron ore and coal.
The most pronounced effect so far has been in Toorak, which is starting to look listless. The sentiment is the Coronavirus has smashed the top end. Nobody wants to put their house on the market if they (Chinese buyers) aren’t buying.
The RBA has now cut interest rates four times within the past year. Recently slashed interest rates from 0.75 per cent to a fresh record low of 0.5 per cent. Coronavirus could wipe anywhere from 0.3-7.9 per cent from Australia GDP depending on the outbreak’s severity, analysts warn.
On the other hand, bonus item, in the long term, many more Chinese may want to migrate overseas, as the virus has made them feel vulnerable in China. If so, we will see a resurgence of strong demand from Chinese foreign buyers in the near future.