As we continue to unravel the full impact of the Coronavirus outbreak across the globe, it is just a matter of time before the Australian investment property market gets caught in the crossfire. But, will it be a full on blaze or just a single flame? Well, property investment guru Michael Yardney, has some good news for EBM RentCover clients…
It is no surprise that Australian property investors will be nervously keeping an eye on how the issue progresses, as the country introduces never-seen-before efforts to keep the deadly COVID-19 virus at bay.
While the news is not positive – with talks of an Australian downturn, a halt in some business activity and trillions of dollars obliterated from global share markets – one leading property and wealth creation expert says the property market is sure to rebound.
Michael Yardney (pictured right) – Director of the Metropole Group of Companies – says of course the number one concern at the moment is the health of Australian people. However, he adds another real concern is the slashing of business and consumer confidence and the flow-on effects that will hit the housing market.
With more than 47 years experience in the property industry, Michael says the current situation will do doubt impact the economy and have a short-term bearing on the Australian property market.
“This is because consumers will become less confident and sit on the sidelines waiting for things to become clear,” he says.
“However, the property market will rebound. I believe in a year from now, in five years from now, and most certainly in 10 years from now, this pandemic will have had no influence on where the Australian property market will end up, and the value of both your home and my home at that time.”
“While I’m concerned for my personal health, and the health of our economy, I’m not really worried about the long-term health of our property markets.”
This is good news for EBM RentCover clients, and is spoken by a man who spearheads a company that gives clients strategic property advice and has reportedly bought, sold, financed, developed, advised and project managed more than $3 billion worth of property transactions.
Here are five points that Michael uses to back up his prediction:
1. Interest rates are low and will go lower
“The prevailing low interest rate environment is making it easier to own a home, either as an owner occupier or investor.”
2. The RBA and government are building bridges
“The RBA and government’s focus is on supporting businesses and households who will suffer major hits to their incomes. They are building bridges to help us get to the other side.”
3. We are seeing more renters
“Soon, 40 per cent of our population will be renters, partly because of affordability issues but also because of lifestyle choices. The government isn’t providing accommodation for these people. That’s up to you and me as property investors.”
4. Population growth
“Australia’s population is growing by around 360,000 people per annum, meaning we need to build around 170,000-180,000 new dwellings each year to accommodate all the new households. Sure immigration will slow down for a while because we’ve closed our borders, but once life moves on, Australia will once again have a queue of people wanting to live in the best country in the world.”
5. Fundamentals are strong
“Sure our economy is facing challenges, and the share market is volatile, but our property markets are underpinned by the fact that 70 per cent of property owners are home owners who are there for the long-term.”
Michael has one over-arching message for investors who are thinking of making big calls during the COVID-19 crisis: now is not the right time to make important financial decisions based on fear.
“Having lived through a number of difficult and challenging times and experiences, I recognise that those who work their way through these times with an optimistic outlook do much better than those who can only see the dark side,” says Michael.
So, what exactly should investors do?
Michael says there is no doubt investors will feel some pain from the Coronavirus outbreak.
However, he says now is a time for understanding and compassion; nobody wins by making things difficult for a tenant who is in financial trouble.
This comes on the back of state and territory eviction freezes, which are expected to last the next six months. While it is an uncertain time, Michael says one thing is certain – this is a time for leniency.
“It’s important to understand that tenants don’t want to be in rental arrears, but if paying their rent leaves them without money for food or medical attention, the decision most tenants will make is obvious,” he says.
“Fortunately, many investors will be able to fall back on landlord insurance to cover some of their losses, but how the landlord deals with the situation may affect the outcome of a claim.”
Managing Director of EBM RentCover, Sharon Fox-Slater, says insurance is a great safety net when things go wrong, and backs up Michael’s comments that a landlord’s response to the COVID-19 situation can impact cover.
She says every action a landlord or property manager takes between now and the time this is all over, may impact the outcome of a claim. Here are a few examples of how:
- Reducing rent: if a landlord agrees to reduce rent, they cannot claim for the difference in payments (e.g. if you reduce rent from $500 a week to $250, you cannot recoup the extra $250 a week through your insurer). However, if the tenant continues to default on the newly agreed upon amount, you may have a claim. Using the example above, if the tenant still has trouble paying the $250 a week, you could submit a claim for rent default (however, an insurer would likely determine the payout amount on the new weekly rent of $250 and not the original $500).
- Putting rent on hold: again, if a landlord wants to suspend rent for a couple of weeks while the tenant gets back on their feet, this would not be covered as it is a mutual agreement and not an insured event. However, if the tenant does not catch up on payments, normal protocols should kick in (e.g. following state or territory legislation to warn or terminate a tenant) and then it may fall under loss of rent and the policy would respond.
- Not working with the tenant to find a solution: During this time, government directives should be followed. So, the first step is for tenants and landlords to work together to find a solution – one that is agreed upon by both parties. If the landlord refuses to work with the tenant to find a solution, a claim may be void because they haven’t followed government advice.
Sharon says EBM RentCover is doing all it can to work with clients to protect their properties.
“Because the government changes vary in all jurisdictions, it impacts ‘loss of rent’ claims in different ways. So, to make sure we are being fair to all of our clients, we are reviewing all claims on a case by case basis,” says Sharon
EBM RentCover will continue to unravel the impacts of the COVID-19 pandemic and its impact on landlord insurance. All updates, including an overview of new legislation, can be found here.
*While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you need us we are there, contact 1800 661 662 if you have any questions.
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