The residential real estate market in the ACT was performing well prior to the COVID-19 restrictions. The auction clearance rate reached its highest level since July 2007 – peaking at 78.5 per cent.
To put this into perspective, that’s up 18.5 per cent on December’s result and a staggering 28.7 per cent higher than last year.
As a result of the COVID-19 pandemic, the residential side of the real estate industry has experienced some restrictions to operations, including no public auctions (until the National Cabinet decision on 8 May reversed the restriction) or open home inspections. Agents worked around this with by-appointment private viewings and auctions via virtual auction platforms.
We’ve found that buyer enquiries have dropped, however, the quality of buyers in the market place has improved. Buyers who attend an online auction are serious about the property. The number of listings coming to market has softened and supply has been limited for these motivated buyers. The outcome has been that prices have remained steady for both houses and apartments, which may be a surprise to some.
At this stage, it is hard to tell whether there will be any changes to property values of houses or apartments in Canberra. If buyer activity continues to be the same, for example, if fewer properties continue to come to market and if the government starts to relax social distancing rules, it may mean prices remain unaffected during this period.
In the longer term, depending on the timing of the social distancing rules and the overall economic environment, the Canberra real estate market could be poised for a bumper spring selling period. Seasonally this is a more active time of the year in Canberra and if strong confidence enters the market we could see prices jump.
On the other hand, the impact of COVID-19 on the commercial market has been much more significant. The forced closure of hospitality venues, people working from home and commercial businesses pivoting on how they do business, means the commercial real estate market has undergone huge change.
One of the longer-term impacts on commercial real estate may be the result of Canberrans working from home. This development will encourage businesses to look at how their business model can encompass a more remote workforce. The need for large office spaces may fall, allowing businesses to save money on this overhead.
If businesses do adopt a ‘work from home’ model, we may see an increase in the amount of commercial office space becoming vacant and, of course, depending on how long the epidemic lasts and the financial health of individual hospitality businesses, we could also see them close and their retail tenancies become vacant. Uncertainty in the commercial market around all these variables makes the future much more volatile for this sector.
I would not be surprised to see some office spaces converted into residential apartments. Depending on the building, the option of converting office space to residential apartments will always be a possibility.
Overall, it’s a wait-and-see situation. But at the current levels of activity, in the residential real estate at least, it’s ‘almost’ business as usual despite COVID-19.