The key to investing in property during lockdown
Buying property during lockdown can make a lot of sense, provided you listen to your head as well as your heart.
Along with Zoom calls, Uber Eats and Netflix bingeing, one of the features of the pandemic has been the rise of virtual tours.
Before COVID came along, taking a trip via iPad had only niche appeal, such as a school "virtual excursion" to a distant museum or zoo.
But with lockdown, virtual tours became a thing. Even though you couldn't step on a plane, you could "visit" everywhere from Machu Picchu to The Louvre with a click of your mouse.
But would you buy a house based on a virtual viewing?
Welcome to the new normal – buying property in the time of COVID.
If I was buying my own home, I would still need to view it "IRL", as the kids say. But virtual tours are amazing these days and could be enough to suggest whether a property is worth pursuing.
Buying an investment property is a different matter, and your decision should be less emotion-driven than buying your own home.
We can speak from personal experience; Cam bought an investment property "sight unseen" during lockdown in Victoria, which he purchased for his kids and put in a trust for them. He looked at estate plans and the way the capital city he chose was performing, so it became a very data-driven decision.
Matt highlights that one factor to consider in a lockdown is reduced competition from other buyers, as a lot of people sit out of the market when there's uncertainty. In Melbourne last year, properties stayed on the market for longer during lockdown but quickly disappeared once the economy opened up.
The million-dollar question: What impact does lockdown have on property price?
People are wary of putting their house on the market during a lockdown, because they're not sure they'll get the biggest auction result.
Coming out of last year's lockdown in Melbourne, we saw the "super Saturdays" that invigorated the pricing.
We predict the same effect in Sydney once we emerge from this hiatus, with a rush of buyers and auctions to market.
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In a hot market, make sure you can buy confidently. Ensure you know the exact dollar amount you can purchase, as it gives you the confidence to put in an offer. This means getting your finance pre-approval sorted before signing a contract to buy.
Another big factor for a property investor is the lure of sunnier states. We saw last year people moving from Victoria up to Queensland, which eased off as the Victorian economy recovered.
Matt and his family were looking at moving to Queensland in February 2020, but the ill winds of the pandemic were already gathering force, so they decided to stay put. By late last year, prices had risen by 30% for the type of property they were looking to buy.
South-East Queensland will be the beneficiary of most interstate migration from New South Wales, so you'll see people leaving a very expensive property market for a more affordable market, and therefore buyers will have deeper pockets.
Following history lessons as we negotiate uncertain times
At OpenCorp we researched what happened after major economic events in recent memory, such as the 1990s recession, the Asian financial crisis and the GFC.
This brings insights and comfort, as it means we can invest with confidence.
Right now, with Melbourne and Sydney in lockdown, buyers can profit from a "warm" market.
But it's important to adopt a long term view. Our advice is to be confident about investing in "the new normal", because we've seen before how markets respond to the back end of any major economic crisis such as the GFC, and the outlook for property investors is solid.
Matthew Lewison is director and Cam McLellan is co-CEO of OpenCorp. Together with fellow OpenCorp director Michael Beresford, they wrote Investing in the New Normal, which analyses all the major events from the 1987 recession through to the COVID pandemic.