The Economy and Current Market – Your FAQs Answered

The economic outlook for 2020 was predicted to show a rise, but the coronavirus pandemic has shaken things up. The unprecedented spread of the virus and the resulting effects on the economy have left many people feeling uncertain, wondering how the effects of the pandemic will affect their property decisions.

While there is no doubt the pandemic has caused some changes, it’s not all doom and gloom, and it’s not forever. In fact, for some people, the market conditions are looking good.

Love & Co have the answers for some of the most common questions about the property market after the economic impact of the coronavirus epidemic.

Is this a good time to be purchasing an investment property?

The economic impact of the coronavirus has created a buyer’s market. Along with government support and stimulus packages, the price of properties is expected to take a (temporary) dip, and rates are low.

There is some uncertainty around wages and some businesses are not performing as well as they were previously, meaning the number of buyers will be lower. However, a buyer with solid employment who is able to buy will find that the coming months will bring some great opportunities. The current conditions also put those looking to build in a good position to negotiate with developers, as well as additional stimulus incentives making building an even more attractive option.

The key will be thinking long-term, and looking for a house that has the potential for growth. There are likely to be fewer houses on the market due to sellers waiting out the short-term effects of the pandemic, but there are always people looking to sell and those who are ready to buy will be in a strong position in coming months.

What happens if I can’t pay my mortgage?

It is in their best interest, as well as the best interest of the economy in general, if owners keep their homes. To that end, there are many options for homeowners who find themselves unable to keep up with their loan repayments.

Being proactive will make a big difference. Get in contact with your loan provider as soon as it becomes evident that you could struggle to make your payments. Negotiating payment arrangements early prevents you from missing payments which could affect your credit, not to mention easing the mental pressure.

You may have a number of options. Many lenders are allowing customers to pause repayments for up to six months if they are struggling to meet their payments. It’s important to understand these payments (and the interest) doesn’t just go away – it gets deferred, so you will need to make up those payments in future. However, as a solution to get you out of hardship, it’s a good strategy.

If possible, it’s better to choose less dramatic options. If you are making more than your minimum payments, you could look into reducing those payments. Tapping into an offset account or redraw facility should also be considered before more drastic options.

Lenders are invested in keeping you going through temporary hard times, so there are options available. Contact your lender as soon as you feel you might run into trouble to discuss your options. The National Debt Helpline also offers free financial advice.

What if my tenants are unable to pay their rent?

In the same way that it’s in the economy’s best interests for homeowners to continue to pay their mortgages, tenants are being supported in every way possible to ensure they can meet their obligations.

There is no straightforward answer to this question, except that according to a government moratorium on evictions they cannot be evicted for failure to pay rent. However, that doesn’t relieve them of their obligation to pay rent. They will need to be able to prove actual hardship – uncertainty is not enough grounds for failure to pay rent. They will also need to prove they have applied for all possible benefits and supplements to help them afford their rent.

The best outcome is a negotiation between tenants and their landlord (ideally via property manager). There are various stimulus packages designed to help people afford their essential payments – and rent is certainly one of those essentials. The negotiations might mean a temporary reduction in rent, or another solution. This is where a property manager is vital – they’re trained to be a neutral party in a highly complex and potentially volatile situation. At worst, owners might need to use their landlord’s insurance.

Do I need to panic?

Absolutely not. The pandemic has made most people more cautious – “discretionary” buyers and sellers who do not absolutely have to buy or sell will probably hold off for the time being until the market stabilises – many experts are predicting mid-way through 2021 should see a return to something approaching normal, assuming there are no new coronavirus outbreaks.

However, there are always the people who have a good reason to buy and sell who are keeping the market moving. Those holding off for a massive collapse in house prices are likely to be disappointed, as the government stimulus packages have made it possible for most people to continue to afford their basic expenses. While sadly some people are likely to experience financial difficulty, most people will continue as normal.

While there will inevitably be some economic fallout from the covid-19 pandemic, it won’t be around forever. Markets are unlikely to fall too far, and will bounce back eventually. If sellers can wait, it might help – but if they can’t, there is still a strong property market ready to put the property in front of eager buyers.

A strong real estate company is going to be your best ally through these uncertain times. Whether you need property management, negotiations with tenants, to purchase a property or to get yours on the market – Love & Co have the experience and skills to get the best result possible.