A Black Swan for the Property investor?

Having bottomed out in 2019 the property sector has been on an upward trajectory. Annualised Australian housing values have increased by 4.1% pa, ending January 2020.  Auction clearance rates have also surpassed 80%. However, all may not be as rosy as it seems.

We are constantly scanning the environment for ‘Black Swan’ events that could impact you and your property exposure.  Having weathered impacts of recent bushfires and storms, we are of the opinion that the full impact of the coronavirus, specifically to the property sector is yet to be realised.

Let’s consider the industries impacted so far:

Airlines: Presently 21 airlines have cancelled flights to mainland China, in excess of 85,000 in three weeks.  At present flights have been cancelled to the end of March. The loss of revenues will force the airlines to cut costs, including requesting staff to take annual leave or worse.

Luxury Items: The luxury goods sector represents in excess of 230 billion pounds per annum.  This sector relies on Chinese buyers who represent approximately 35% of purchaser pool. High fashion brands are starting to feel the pinch with Burberry having jut closed 64 Chinse stores as shopper numbers have plummeted by approximately 80%.  They have not, as yet, released their financials.

Manufacturing: Dun & Bradstreet say an estimated 5 million companies have Chinese suppliers.  With lead times of six to eight weeks for supply, we will only see impacts in March.

Banks & Insurers: the impact on banks in China will be seen toward the end of the month.  Results are likely to be weak with low to no loans and weak fee income.

Education sector: At present more than 107,000 Chinese students, who have already have Australia student visas, are stuck in limbo.

Tourism: Australia’s largest international tourism market is China. As Chinese tourist numbers decrease the impact on the Australian economy increases.

In light of the above we anticipate that the retail, accommodation and residential sectors will be hit.

Of immediate concern is the status of local residential accommodation for those Sydney residents trapped in China . Where do these people live? How are they paying rent? Mortgage? Are they employed? Under what basis? When will they return? How do you ensure you are still being paid your rent?

This is an evolving situation which we are monitoring very closely for our clients, residential and commercial.

For clearer insight and better management of your property call us today.


John Wills FAPI
+61 467 443 838

+61 2 9387 1700

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