New year, New market
As the new year is already well underway, many people are wondering what to expect in 2021. They’re also wondering how the property market is doing after the economy took a big hit in 2020.
Well, it’s not all doom and gloom – in fact, 2021 is looking bright for buyers and investors. Some experts are even calling it a property ‘Boom’ as Australia’s property values continue to rise while our economy grows along with it.
January is often a quiet time in the Australian property market, but this January saw some gains across Australia’s capital cities.
Excluding Melbourne, all the capital city markets are higher than they were 12 months ago. Luckily, Melbourne has still recovered from its dips over the last few months and will likely keep improving soon.
The following chart from CoreLogic showcases this nicely.
Melbourne’s prices have been volatile in the past year, no doubt because of lockdowns, but their recent growth comes as confidence returns, as well as renewed market activity. Up by 1.3% over the last quarter, and thanks to a lack of COVID-19 cases and people going back to work, we can be confident that the Melbourne property market is finding its feet again after the low point in mid-October.
In Sydney, the prices have gone up over 2020 and in the last quarter have risen 1.2% with a median property value rise of 2.9% over the last year.
Though it had a quiet start in the first half of 2020, Perth eventually began to make some gains again, with prices up by a net of 1.4%. Overall, we can expect each capital city to continue growing during this quarter.
Adelaide and Brisbane, however, have proven the most resilient. Despite signs of flattening in the September quarter, this year has seen Brisbane prices rise by 4.5% and Adelaide rise by an impressive 5.7%.
So, overall we’ve seen gains, slowly but steadily.
The number of Australian Properties for Sale are Becoming Limited
Currently, there is a rush of property buyers in Australia, keen to own property before the expected market surge.
This means that the number of properties available is becoming limited, with significantly fewer properties on the market compared to a year ago.
What does strong demand but limited availability mean? Answer – Property price growth. The value of prices will likely keep rising at a modest rate.
Here’s Why Many Believe that the Australian Property Markets are Going to Perform Well in 2021
Although nobody can predict the future, there are indicators which historically can point us in the right direction. Below are some of these indicators for the Australian Property Markets in 2021:
- Consumer and business confidence is improving as people go back to work and businesses open up. A lack of COVID-19 cases means more certainty at the moment.
- We’re in a strong period of job creation which can only help boost the market with more spending
- Transactions increase significantly as more buyers and sellers enter the market, adding to market growth
- Interest rates remain low with a ‘guarantee’ to remain low for the next 3 years, giving consumers confidence in the market
- Bank loan deferrals are decreasing
- Across Australia, Auction Clearance Rates have been strong for all capital city markets
Earlier last year, when COVID-19 was in full force, there were fears of much more significant housing price falls, but luckily this didn’t occur. Although there was some economic fallout, experts predict strong growth this year and onwards into 2022. Australia’s reaction to the global pandemic meant that things could have been a lot worse and we are back on our way to a more stable market.
The Lowdown on Property Prices Right Now
Australia, like the rest of the world, went through a period of economic uncertainty. Luckily, we’re starting to see more stability which is expected to keep on improving in the coming months.
The shortage of A-Grade investment properties and homes and the high demand from buyers means that certain locations see prices slowly rising.
B-Grade homes are a little different, in that they’re being sold at a discount, and there’s a lack of interest for C-Grade homes.
‘For Sale’ Properties in Australia
As buyers – and confidence – return to the market, we see a growing interest met with a lack of properties for sale, and so there’s a queue of buyers waiting to buy property. Over the last year, the number of properties for sale has gone down by 13.7%. It’s the high demand, with not enough good properties for sale, that is one of the key reasons why prices have been doing well.
Vendor Metrics Suggest a We’re Entering a Seller’s Market
With vendor pricing at realistic levels and the number of days to sell properties being reduced, vendor metrics suggest that we are entering a Seller’s Market.
The shortage of properties on sale is also seeing properties selling quickly and with minimal property discounts, suggesting that they are easier to sell.
Australia’s Rental Market
Australia’s Rental Market took an unprecedented hit from COVID-19 and will likely remain subdued for some time.
As a result of the pandemic, demand for rental properties has dropped and, at the same time, supply has increased which means lower prices.
With a lack of new and returning international students and those living in Australia temporarily, along with border closures, the Australian rental property market has taken a fall.
Particularly during 2020 in inner Sydney and Melbourne, the long-term market has also been negatively affected. This has led to discounts and short-term agreements being introduced in the long-term market.
Overall, it looks like that rent growth will remain subdued for the next few months.
Australia’s Auction Clearance Rates
The following are some clearance rates throughout Australia which may help to paint a better picture of property auctions right now.
Sydney’s Auction Clearance Rates ended 2020 strongly. Signs suggest that we’ve passed the bottom of Sydney’s property market and that price growth is expected to continue.
Despite 864 properties being taken to auction, Melbourne’s auction clearance rates ended the year strongly, as market confidence grows and demand is slowly restored. As life returns to normal, we can expect stronger demand to occur.
Brisbane, like Adelaide, is performing very strongly despite the COVID-19 pandemic. In fact, Brisbane’s number of sales are notably higher than before COVID-19 came to prominence. For Brisbane, we can expect a surge in demand from property buyers and investors. Hopefully, other major cities will follow suit.
First Time Home Owners May Dominate 2021
The end of last year saw the highest rise in new home sales in 20 years, despite the pandemic-induced recession. This can be due to lifestyle changes, government incentives, and reduced interest rates (interest rates are the lowest that they have ever been). We see many people buying homes in outer suburbs to make the most of government discounts, such as the HomeBuilder scheme. Currently, grants are being given by federal and state governments. This, along with lower mortgage rates shows people are focusing on more affordable housing post- COVID-19. When it comes to units, most people, however, focused on inner-city areas such as Parramatta in Sydney.
Despite this surge in demand, we can expect the rush of first-time homebuyers to flatten in later 2021 after the government incentives reach a point of exhaustion.
What We Can Take Away from the State of The Australian Property Market
Despite the unpredictable nature of 2020, we can still read the signs and make some educated guesses about what 2021 will hold for the housing market.
Firstly, it’s important to see the property market as not just one market, but several throughout different states and even cities. The way the pandemic has affected each city has varied, so it’s good to consider this too (with Melbourne being the hardest hit).
Here are some of the takeaways from the current property market:
- Australia’s performance as a whole is doing much better than expected and we’re now entering a much more certain period.
- Consumer confidence is on the rise. According to research on finder.com.au, 67% of Australians think now is a good time to buy or invest in property. This is up by 47% since April last year.
- Unemployment fell to 6.6% at the end of last year, which means we’re steadily climbing out of the recession.
- According to domain.com, Australia’s housing prices are more expensive than at any time in history, with a national average price for a house at $852,940 in the December quarter.
- Housing rentals are going strong, but apartment or unit rental markets are much more subdued, again showing how the market can vary across different cities or property-type
Despite the challenges ahead, experts are much more optimistic about the coming year. Either way, it looks like we’re out of the worst of it in many ways.
The information in this article is general in nature and might not be right for your circumstances. Please arrange a meeting with one of our Accountants to discuss your particular needs. Accountants 2 Business Ph (07) 3823 2344