The impact on Australia as global real estate markets feel the effects of COVID-19

Market Insights
3 years ago
4 minutes

The pandemic and its impacts are playing out across global real estate markets. 

Commercial real estate investment fell across all three regions in the first 6 months of the year – with the Americas down 37 percent, the Asia Pacific (APAC) down 32 percent and Europe, the Middle East and Africa (EMEA) down 13 percent.

“Cross-border investment has slowed significantly with travel restrictions, in particular inter-regional investment which declined by 61 percent during the second quarter. Those markets that are more reliant on foreign capital are feeling the effects, resulting in steeper activity declines,” says Sean Coghlan, Head of Research, Capital Markets, JLL.

RBA Governor Philip Lowe noted in the July RBA meeting minutes that the reduced flow of new arrivals to Australia is affecting Australian markets, primarily to the rental market – with the major markets of Sydney and Melbourne experiencing sharply increasing vacancy rates.

The RBA members asserted that conditions in the established housing market remained mixed.

"Housing prices in some larger cities had declined in June, though were only a little below recent peaks in the case of Sydney and Melbourne", Lowe said, also noting that house prices in numerous smaller cities are broadly unchanged.

The Australian Trade and Investment Commission explain, “Australia, like other nations, has been impacted significantly by the COVID-19 pandemic. The country has put in place strong public health measures to slow the spread of the virus, and introduced economic stimulus packages to support Australian businesses and consumers.

Despite these challenging circumstances, Australia remains open for business and continues to welcome international investors and business partners. Our country’s resilience, open business settings and record of strong economic performance over the past 28 years mean Australia is likely to recover well, providing a safe and stable environment for investment.”

Australia remains a safe place to invest 

Throughout this time of uncertainty, Australia continues to offer a stable and safe environment for international investors, which is the messaging being communicated by the Australian Trade and Investment Commission.

Australia’s stable economic growth, strong institutions and open markets attract high levels of investment. In 2018, Australia was the eighth largest recipient of FDI inflows worldwide, ahead of India, Canada, France and Germany. The European Union and North America contribute almost half of all FDI in Australia, with solid capital inflows from China, Japan, Hong Kong and ASEAN member nations.

The country’s economic resilience is testimony to sound management, longstanding trade and investment ties with major markets and a global reputation as a reliable exporter of natural resources and agricultural commodities. A mature financial services sector with assets of around A$8.5 trillion provides a significant source of local capital.

Promoting an agile industry 

The COVOD-19 pandemic has increased the necessity for some boundary pushing within the property sector, giving industry leaders the opportunity to test some long-held ideas.

“Lockdowns were rolling out and banks and other lenders immediately recognised that inspections would be a problem,” says Bart Mead, executive director, valuations and advisory, JLL. “Because if a bank can’t get a valuation, it can’t lend, and that would be a huge problem for global economies.”

Banks and other lenders have been relying on video calls to conduct property inspections as lockdowns and social-distancing rules prevent valuations being carried out in person.

Buyers can now view a number of Australia’s top developments featured on Apartments & Developments via video appointment. 

As a forward-thinking and agile industry, the property and development sector has been quick to adapt to the latest government restrictions put in place to stop the spread of COVID-19. Video appointments and virtual inspections offer a fantastic opportunity for interested buyers to view properties without having to leave their homes.

Navigating global uncertainty

Global investment volumes have sharply declined amid growing caution and ongoing uncertainty, which will undoubtedly present ongoing challenges for the global markets. 

Markets with high transparency and deep pools of domestic capital have proved most resilient to the pandemic so far, as cross-border investors’ ability to carry out necessary due diligence is hindered by travel restrictions.

The Australian Trade and Investment Commission plans to continue to present Australia as a stable and safe investment opportunity, which will hopefully bolster the markets throughout the pandemic. 


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