Kel Twite, Director at SJB Planning, explores the planning industry’s adjustments with COVID-19 regulations. Frida Khalo’s home is exhibited on dezeen. The ASX sees its worst quarter since 1987.

EXPERT COMMENTARY

NEWS SUMMARY

Key headlines

• COVID-19 spooks property buyers, economy: McLennan (The Age 30/03/20)

• Property sales collapse ‘inevitable’ but price falls may depend on government intervention (The Australian 02/04/20)

• Store closures, jobs losses: Retail industry braces for another brutal week (The Age 30/03/20)

• Rent-free deals have started — and they are big (AFR 02/04/20)

• Banks try to stop wave of evictions with loan delays for landlords (The Age 30/03/20)

Eviction moratorium

The AFR reported that for the next six months both residential and commercial landlords will be prevented from evicting tenants in financial stress due to coronavirus. The moratorium adds to previously announced banking sector assistance. There is still uncertainty on the final details of the support initiatives. (Landlords face six-month eviction freeze – John Kehoe, 29/03/20)

Residential sector

The AFR reported that a looming recession will likely force owners who cannot fulfil their monthly obligations to sell their properties. Repayment holidays will protect Australians who cannot repay their loans, but only for six months. UBS economists have predicted a slump in the housing market over the coming months and are encouraging state and federal governments to step in again after the mortgage holidays expire. They also predict that home sale volumes will collapse and new housing construction and dwelling approvals will see a swift drop. Whilst the extent of the impending decline is unclear, HSBC economists estimated house prices will drop between 10 and 20%. (House sales will ‘collapse’, says UBS as it rips up its forecast – Michael Bleby & Duncan Hughes, 02/04/20)

The Australian reported that CoreLogic house price data revealed stunted growth in March, with the lowest monthly price rise in almost a year. This was attributed to sinking consumer confidence and social distancing policies and public auctions bans designed to stop the spread of COVID-19. (CoreLogic house price data shows coronavirus slowdown underway in March – Mackenzie Scott, 01/04/20)

The Age also reported that the falling number of real estate transactions makes it difficult for economists to assess the data – the market is not deep enough to provide real statistical evidence of the economic impact of the virus. (Ominous signs the property market is running out of steam – and fast – Elizabeth Knight, 01/04/20)

Read more market analysis on The Urban Developer – Coronavirus: Home Sales Set to Halve in Near Term.

Auction results last weekend echoed the decline in transactions, with the AFR reporting that over 1000 scheduled auctions were withdrawn due to extremely low demand from buyers and the fear of contracting COVID-19. (‘This is deadly’: 1000 auctions pulled as floor falls out of market – Duncan Hughes, 27/03/20)

The Real Estate Conversation analyses last weekend’s auction results in ‘Auction clearance rate at 51.4 per cent nationally’.

Commercial sector

Retail

The AFR reported that the federal government is introducing a scheme to limit permanent job losses and protect retailers by paying retail employees up to 80% of their wage during the coronavirus shutdown. (Two ways wage subsidy helps stricken retail – James Thomson, 30/03/20)

But numerous retailers are still closing their doors indefinitely. The Age reported that clothing and footwear sales could come to a standstill and the Australian Retailers Association stated that retail sales have sunk by approximately 75%. (Store closures, jobs losses: Retail industry braces for another brutal week – Charlotte Grieve, 30/03/20)

Closures this week include:

• Brand Collective (Shoes and Sox, Clarks, Mossimo)

• Myer

• Winning Group (Appliances Online)

• Uniqlo

• Retail Apparel Group (Tarocash, yd., Connor)

• Accent Group (Hype DC, The Athlete’s Foot, Platypus)

The Urban Developer analyses retail’s current economic climate in ‘Retail Spending Down Despite Food, Alcohol Spike’.
 

Retail rent agreements
With the eviction moratorium being introduced, retail rental agreements have been at the forefront of headlines. The AFR reported that rent relief to retailers is likely to be introduced next week by reducing land tax and council rates. Landlords are understandably concerned. Whilst banks are offering loan holidays for some, other commercial property owners must begin to prepare for little or no rental income until the effects of the pandemic settle. (Commercial landlords to defer, waive rents – Phillip Coorey, 02/04/20)

The eviction moratorium is complex and uncertain. The Urban Developer highlighted the need for rental parties to cooperate: Retailers, Mall Owners Unite in Call for Clarity on Leases.

Hotels

The AFR reported on alarming vacancy statistics for Australian hotels, with 80% of hotel rooms vacant every night of the week.  One month ago, 80% of rooms in Sydney and Melbourne were occupied every night of the week. This is the direct result of strict travel restrictions and social distancing rules. As tourism numbers collapse, many smaller hotels have shut completely. (Sydney, Melbourne hotel occupancy rates plunge to 20pc – Larry Schlesinger, 27/03/20)

Some hoteliers changed their business strategy. The AFR reported that some luxury hotels are offering voluntary self-quarantine packages for those looking to avoid their offices and homes. Some are offering add-on packages whilst others are advertising day rates enabling hotel rooms to be used as an alternate office. (Hate your home office? Try this room with a view – Fiona Carruthers, 31/03/20)

Other hoteliers are providing rooms and services to the homeless. Read more on The Urban Developer: Hotel Rooms Protect Rough Sleepers From Coronavirus.

Similarly, Airbnb is offering accommodation assistance to health care workers. Urban Developer explains in ‘Airbnb plans to help house 100,000 COVID-19 responders’.

Financial sector

The AFR reported that the Australian economy will suffer into the second half of 2020 in the wake of COVID-19. RBA meeting minutes from March reveal that economy forecasts are difficult to calculate, but it is likely that a very material contraction in economic activity will occur in the March and June quarters and for potentially longer. (‘Material contraction’ to last beyond June, RBA says – Matthew Cranston, 01/04/20)

ASX

The market fell 24.1% in the March quarter this year. This is the worst quarter since December 1987. Fortunately, as coronavirus cases in Australia fell this week the market is looking positive and is seeing some improvement, albeit slowly. (Late fall pushes ASX to worst quarter since 1987 – William McInnes, 31/03/20)

Banking

The Age reported on the willingness of banks to assist during the fragile mortgage climate – loan repayments can be delayed up to six months to avoid commercial and residential evictions. But banks have also warned that they cannot save everybody. ANZ’s CEO Shayne Elliot states that they will need to prioritise companies with ‘sustainable business models’ to avoid Australia emerging from the coronavirus crisis as a ‘zombie economy’. (Banks try to stop wave of evictions with loan delays for landlords – Clancy Yeates, 30/03/20)

Construction sector

The impact on Australian markets is now flowing through to the construction industry, with Hutchinson Builders announcing 200 redundancies and wage cuts of up to 15%. This was brought on after the company saw six of its upcoming projects either falling over or being put on hold. Fortunately other construction companies have reported business as usual according to the AFR. (Australia’s biggest private builder cuts staff, prepares for the worst – Ingrid Fuary-Wagner, 01/04/20)

A second coronavirus case on an Australian building site has been confirmed this week. Read more on The Urban Developer: Coronavirus Case Confirmed at $2.8bn Melbourne Square.

The Age reported that the site’s workers are conflicted between remaining on-site and possibly getting infected, or staying at home and not getting paid. Social distancing on construction sites is becoming a serious concern and could result in site shutdowns if workers do not adhere to the strict requirements. (Secret tape reveals building industry angst after positive virus test – Tammy Mills & Clay Lucas, 02/04/20)

Building Approvals

Australia saw a huge 19.9% increase in dwelling approvals in February as reported by the AFR but this positive news will not last long.  BIS Oxford economists stated that these ABS statistics released this week mean very little, as they don’t reflect the COVID-19 crisis and will decline steeply in March’s data. (Building approvals jump, but it won’t last – Michael Bleby, 01/04/20)

Read more in The Urban Developer’s report: Building Approvals Rise, But Brace for Fall.

Debuilt Property provides development & monitoring support to investors and financiers. Visit our Financier.Investor Services page to find out more about our services.

ARCHITECTURE & DESIGN

Modernist red house Juan O’Gorman designed for his father is captured in photos

This exceptional dusty red exterior of Juan O’Gorman’s father’s Mexico City home have been captured by Photographer Lorenzo Zandri. The adjacent plot contains a home that was designed by O’Gorman which was commissioned by Frida Kahlo. Read more at dezeen…

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