Valocity Ecosystem Contributing Author: Greg Sugars, CEO of Preston Rowe Paterson in Australia.
We all recognise that Covid-19 has changed the way we live and affected every industry, including the property ecosystem. In an uncertain world to ensure continuity we know success and survival requires agility and the acceleration of digital connectivity and no more so than in the property and valuation industry.
To share their experiences and what to expect in the Australian property market we asked Greg Sugars, CEO of Preston Rowe Paterson to share some key insights.
How has PRP responded to COVID-19 restrictions, how has it impacted your business and clients?
The COVID-19 Restrictions saw a marked increase in appointment refusals by occupants who were either self-isolating, quarantined or simply being more diligent in letting a stranger into their property for health reasons. Whilst our valuers were practising “no contact” inspections, this was still not acceptable to some occupants.
We were absolutely delighted to introduce the Valocity Connect App to our business during the crisis and it really allowed us to reduce the number of access refusals. The Valocity Connect App was easy to use, customisable to our stringent requirements, but most importantly provided bank-grade security for all data stored and transmitted. Utilising the App, occupants could undertake the internal inspection on our behalf by taking photo’s, which are all Geocoded, and completing a PRP designed questionnaire.
The feedback has been great and it has helped us move through the backlog of delayed valuation instructions, particularly for the banks we work for, where turnaround times are so important.
As the economy recovers what property market trends are you predicting?
In Australia, at the moment we are of the opinion that a lot of the government stimulus and in particular Jobkeeper and Jobseeker payments are masking the extent of the damage done by the slowing down of the economy and in particular the unemployment rate. The market does not react uniformly even in normal market conditions and the COVID-19 crisis will, in our opinion, exacerbate some already evident structural issues in various property sectors.
For example, it goes without saying that the retail property market has been most severely affected and the Commonwealth Code of Commercial Leasing Conduct anticipates huge rental abatement and deferrals by tenants, which will severely affect the cashflows of property owners. Vacancy levels will be higher for some period and the letting up incentives will no doubt increase substantially.
Tourism and hospitality related property have likewise been most severely affected.
In the residential markets, we will continue to see high end/trophy property trade without many encumbrances but we believe the biggest effect will be on the mid-tier markets where the owners have to utilise their properties for security to assist in small to medium-sized businesses. The investment-grade property will also be affected in the short term as the rental market appears to be softening and submarkets, such as student accommodation, have obvious signs of stress.
Conversely, because Interest Rates are at a record low, and likely to stay that way for a number of years, we see the property market behaving differently to the GFC and the 1990/1991 recession. Back then interest rates and bank liquidity all played a major factor in the market and that will not be the case post-COVID.
What long term impacts or changes do you see COVID-19 will have on the property market in AU?
There is a lot of talk about trends in Commercial Office markets given the ability, now proven, of the “working from home model”. Saying that I for one can’t wait to get back into the office!
In Australia the propensity towards online shopping was growing and the NAB Online Retail Trade Index was showing 14.5% in February 2020 and anecdotally, this must-have grown substantially during COVID, and, with the failures in the retail industry, it is likely to stay this way. We will probably see a number of traditional shopping strips transform into residential or alternate uses over time.
There will be a renewed focus on the Industrial sector and to be truthful, this has probably been the least effected during COVID, as we have seen increases in manufacturing, logistics and distribution services.
We may also see a trend of decentralisation where people move their homes outside traditional metropolitan areas as the acceptance of online communication tools such as Zoom and MS Teams has proven the need to be in the office each day is not so necessary.
What are your predictions on the Australian property market prices and demand?
We have seen residential prices on the East Coast Capitals of Melbourne, Sydney and Brisbane come down between 5-10%. The key demand indicators are still strong but this may weaken if unemployment trends do not reduce post-COVID-19.
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