By Guest Blogger, Peter Koulizos, property lecturer and author
www.thepropertyprofessor.com.au
Well, what a year 2020 has been! We started off with bushfires and then spent the rest of the year focused on COVID-19. The global pandemic has certainly impacted on our business and consumer confidence, critically affected our economy and probably changed forever how our government, and governments all over the world, deal with economic shocks.
However, Australian residential property has remained resilient, as has been the case in previous recessions and more recently, the Global Financial Crisis (GFC). Despite the horror headlines that emerged early in the COVID-19 crisis, property prices haven’t dropped by 30%, investors have not had to endure forced sales and tenants were not thrown out onto the street.
In fact, most of the property stories that I have heard and read about are good news stories. Property values are now increasing, albeit slowly, and rents are increasing, not so slowly. With so little rental stock available, many prospective tenants are offering more than the asking rent to secure a property. Interest rates are low and look like they will be staying low for quite a long time.
Has COVID-19 taught us any lessons? I’m glad you asked!
The main lesson to be learnt is that property investors need to be flexible.
There were many owners of short term holiday accommodation and AirBnB properties who were impacted by the closure of the borders. These types of investors depend heavily on travel but when travel is severely restricted, it severely impacts the investor and their cash flow. It was good to see many of these landlords adapt quickly and change their offering from short term to long term rental. This move saved their cash flow and probably their asset.
Owners of office property will also have to be flexible and think outside the square. With more people working from home, even for part of the working week, there will be less need for as much office space. Investors of office property will also have to think outside the square as they may need to repurpose their premises or risk enduring long vacancy periods and low rents. One possibility is co-working. This is a relatively new global trend but it is growing at a much faster rate than traditional office space. With some minor changes to the internal configuration and the lease, converting traditional office space to co-working space is one option to help secure or possibly increase the investor’s cash flow.
There also needs to be flexibility in the design of our homes. People all over the world were forced to stay home for long periods of time and this has caused a global rethink on the properties we live in. Space is more important. This doesn’t mean storage space but a place(s) where people can be during the day. For example, a dedicated study will be a more permanent feature of our house designs. Natural sunlight is another important aspect. Being locked up in the house for weeks or in some cases months, can be very detrimental to your health, especially mental health. Rooms that face north, larger windows and skylights will become more popular features of a home. One of the critical areas people are looking at is outdoor space. Small apartments and units with no or limited private open space will not be as popular. They might be more affordable but many home buyers and renters are seeking backyards or at least an outdoor area that is a reasonable size and they don’t have to share with others.
There is no doubt that 2020 has been a very challenging year in many respects. We look forward to 2021!
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