Resilience: lockdown and market impacts

The first six months of 2021 have been strong for all the major city property markets – with record capital growth across the board.

But after 5 weeks of lockdown in Sydney and with other states/cities also experiencing lockdown or some restrictions and impacts as well, what can we expect for the markets?

Lockdown: market impacts

In the case of Sydney’s restrictions, we’ve seen the number of auctions drop as buyers and sellers postpone, taking a wait and see approach on when the restrictions would lift. There are also some short-term effects on confidence.

But what has been driving capital growth, prior to these new Covid cases, is the market fundamentals, which remain strong.

We are still experiencing historically low interest rates; APRA has even recently advised banks to be prepared for a zero or negative interest rate scenario. The RBA has advised this is unlikely, but banks are making tactical changes to prepare for this scenario, in case.

With a low cash rate, there is no return from having cash in the bank, with property still remaining the most accessible option for many investors.

At the same time, other property market drivers such as strong economic performance together with low supply and high demand are all still in play. According to Goldman Sachs, while the Sydney lockdown is expected to impact GDP with a decline of 1.4% in the September quarter, it will bounce back strongly with a “solid” +2.5% quarter on quarter rebound as restrictions ease.

Compared to where we were in March/April of last year, our position is so much stronger nationally as well. Back then there was so much uncertainty about how big the impact would be – from a health as well as economic perspective. We have been relatively lucky in both aspects; that ‘doomsday’ fear has not eventuated.

So as restrictions and lockdowns ease, I would expect sales activity to resume and the market to heat back up again fairly quickly. As more of the population becomes vaccinated, and we adapt to ‘life with Covid’, this will also have a positive impact.

Dreams take time – and resilience

The other aspect that I’ve been reflecting on this month through this challenge of lockdown, is the power of resilience and persistence. This month we’ve seen Richard Branson realise a childhood dream of flying into space – but it took his company 17 years to make it possible.

With property investment, the end goal is success, and resilience is required. Success comes to those who persist and don’t let setbacks get in the way. They might even see a setback as bringing them one step closer to their goal – due to the knowledge and experience they’ve gained from the setback.

Things happen, challenges arise, and a global pandemic is not something any of us expected to happen.

Some people have taken the pandemic from a pessimistic point of view – ‘oh well, may as well just live for the day, spend my money, doesn’t matter what I do.’ But I think, for investors, now is the time to plan for the next 10-20 years. A bigger home in lockdown could make a real difference. Less fear around job security would be great! If it’s something you have been planning to do, then don’t look for reasons why you shouldn’t.

Instead, having a plan in place to achieve this is the first step, and while short term currents can take people off course, resilience is the quality that will help you succeed.

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Every day I feel grateful to live in this country, to do what I love to do. Over the last 12 months we’ve witnessed first hand how much the world can throw people’s lives around. With Ironfish, we hope to be able to support more people with their dreams, to look for the positive in the everyday and to enjoy a more prosperous life.

If you need some help with your investments, please reach out to us, we are here to support you.

Or if you are feeling ready – financially and mindset-wise – to start investing for your future, we’d love to help.