How will the share market crash impact retirement village sales?

Over the past 14 days the Australian share market has fallen by 19.6%.

The impact of China closing from late December is finally being recognised across the world.

Here in Australia, 61% of all construction materials come from China and existing stocks here are close to exhausted.

The world will come out the other side of coronavirus but what will be the short- to medium-term impact on ‘confidence’ and retirement villages in particular?

When the Global Financial Crisis hit in October 2007, retirement village sales were impacted six months later and stayed that way through to 2011.

Villages that were enjoying four sales per month were scrambling to get one sale.

The reason? Sellers of their family homes wanted or needed their pre-GFC value and emotionally were not prepared to sell for less.

Question two, house prices. I have been writing regularly that a 15 to 20 per cent fall in the share market endangers dwelling prices – particularly the more expensive dwellings and those in tourist areas. The share market has now fallen 20 per cent so dwelling prices are in danger. Usually it takes between six to 12 months for the residential property market to crack but it can take up to 18 months. Because capital often swings to bricks and mortar, after a share fall, sometimes property initially actually rises. But longer term, the two markets are governed by similar forces.

I suspect that this time the downward price flow on to property will be quicker, because the virus confidence flow in affects people much faster than, say, a credit squeeze.

Retirement villages are a needs-based purchase. I expect over the next 12 months marketers will have to ensure their value proposition is firmly anchored in the supply of a safe physical living environment and care support built in.

Trust and verifiable resident satisfaction will be more important than ever.

Interesting times.