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Australian homeowners are feeling more confident about selling their properties in a red-hot housing market as the COVID-19 situation improves.
The property market is booming in 2021 as record demand far outstrips the supply of stock for sale, pushing property prices sharply higher and leading to homes selling faster and sales volumes rising.
Historically low-interest rates and FOMO (fear of missing out) have driven dwelling prices to record new highs – but we’ve only recently surpassed previous 2017 peaks and this means double-digit growth is on the horizon for many areas around Australia in 2021.
The year has started on a very strong note, with increased buyer activity at a time of lower availability of stock of quality properties in popular areas and this is reflected in rising property values and boom time auction clearance rate levels.
But, there is not one “Australian property market” and even within each state, there are multiple markets, divided by geography, type of property, price point, etc so in this detailed article I’ll explain what our research suggests is ahead for Australian house prices.
According to CoreLogic's Hedonic Home Value Index, nationally the median value of an Australian dwelling rose 2.8 per cent in March to $614,768. That price includes both detached homes and units.
Buried in the data however, is potentially the reason why. The strength of the housing market, according to CoreLogic, is being "supported by a disconnect between demand and supply".
The is a “perfect storm” of factors suggesting that 2021 will be a great year for property investors: –
Consumer confidence has been gradually improving, as has business confidence
COVID numbers are very low and the prospects of the success of our vaccination program is excellent
Our economy is improving faster than many expected and likely to grow strongly in 2021-22
Auction clearance rates remain consistently strong, not just in the two big auction capital of Melbourne and Sydney but around Australia
While more buyers and sellers are in the market and transaction numbers have increased considerably, the lack of good quality properties for sale has created a seller’s market, where buyers have little choice and are pushing up values of “A grade” homes and investment-grade properties
At the same time, the banks are keen to write new business – another positive for our housing markets
Bank loan deferrals have been falling – there’s no chance of an avalanche of forced mortgagee sales as many were worried about last year
The “guarantee” by the RBA of interest rates remaining low for at least 3 years is giving home buyers and investors confidence to commit to purchasing properties
Moving forward further jobs creation, consumer confidence and business confidence (leading to spending and employment) will underpin our housing markets
It’s clear that we are now over the “recession we made ourselves have”, 93% of the jobs that disappeared during Covid have returned and consumer and business confidence is rising.
And our savings war chest will continue to fire our economy….
The Commonwealth Bank estimates that Australian households have put aside $120 billion more than what is normally saved in the June, September and December quarters last year — equivalent to 6 per cent of gross domestic product as overseas travel and social activities were curtailed.
The bank’s analysts believe this money will be spent over the next few years, providing continued economic momentum as a good chunk of this money will find its way into consumer spending.
Some of it will go to paying down debt and some will go into buying assets. We’re already seeing this in retail spending and in our property markets. Moreover, with borrowing costs lower than they ever have been, the reassurance that interest rates won’t rise for at least 3 years and increasing confidence that we’ve got this “virus thing” under control, it is likely that buyer demand will remain strong throughout the year.
Outlook for the Australian property markets for 2021 and beyond?
The Australian economy is recovering due to our relative success in suppressing the COVID-19 virus as well as the speed and size of economic stimulus and support supplied by all levels of government and the Reserve Bank.
The bad news is that Europe and the US are experiencing second waves of the virus, driving case numbers to record highs and necessitating fresh lockdowns.
The good news is that effective vaccines are set to be distributed across the globe with doses already being rolled out in the UK.
The economic outlook will clearly be dictated by the virus and how quickly the vaccines can stem case numbers and allow economies to start repairing.
After contracting an estimated 2.5 per cent in 2020, the global economy is tipped to rebound by 5.5 per cent in 2021.
On the same basis, the Australian economy is tipped to grow by 4.9 per cent in 2021 after contracting 2.8 per cent in calendar 2020.
This is a common question people are asking now that our real estate markets are up and running again.
A new report released from ANZ Bank predicts house prices at the national level will rise to a strong 17% through 2021, before slowing to 6% in 2022.
They see:
Sydney house prices increasing by up to 19% by the end of the year
Melbourne house prices rising by over 16% over the year
Brisbane house prices rising by 16% this year
Adelaide house prices rising by over 13% over the year
Perth house prices rising a whopping 19% in 2021
Canberra house prices rising by over 16% in 2021, and
Darwin house prices rising by over 16% this year.
What a turn around from all the pessimistic forecasts all the banks made in the middle of last year.
My Finance Agent can provide you guidance in relation to investing in the property market so you have the best possible understanding of whats involved.
Talk to one of our experts today on 02 8313 8400.
*Information within this publication has been sourced from RealEstate.com.au, PropertyUpdate and 9news.