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2021 will see a nationwide Australian property boom: Hotspotting’s Terry Ryder

nationwide Australian property boom

A factor to consider is that the growth achieved in 2020 occurred without much involvement from investors, first-home buyers and other owner-occupiers have dominated


This year will deliver a nationwide property boom. I have few doubts about that and my confidence is strengthened by the number of commentators who are now forecasting a year of strong growth. It’s not often we see all kinds of analysts agreeing about what will happen with property prices.

It’s even rarer for economists to publish optimistic predictions. Even the major bank economists are bullish about real estate this year. Pretty much everyone with a public view about the direction of real estate markets – economists, media columnists, various attention-seekers and genuine real estate analysts – have been unanimous in tipping substantial price growth in 2021.

Perhaps the only point of difference among the pundits is how much. But many of them are expecting double-digit increases in median prices. It’s not so long ago that major media, fueled by pessimistic economists, was strident in declaring an impending collapse in property values. The housing market proved the naysayers wrong: 2020 was the best possible advertisement for residential property as an asset class, as most markets delivered growth in defiance of the pandemic.

The latest figures from CoreLogic suggest that all capital cities except Melbourne had price growth in 2020, with Canberra, Adelaide, Darwin and Hobart all rising between 6% and 9%. Sydney (up 4%), Brisbane (4.6%) and Perth (2%) all recorded moderate growth in their house prices, in a year when most of the nation’s cities defied the pandemic and its negative economic impacts. That’s a commendable performance but the capital cities were out-done by many of the regional markets.

house prices rose 12% in Regional Tasmania (compared to 7.7% in Hobart), 8.8% in Regional NSW (compared to 4% in Sydney), 7.8% in Regional South Australia (compared to 6% in Adelaide), 7.3% in Regional Queensland (compared to 4.6% in Brisbane) and 5.5% in Regional Victoria (compared to a 2% decline in Melbourne). Unit markets also did well in the regions, with price increases headed by South Australia (up 11.7%) and Tasmania (up 10.5%). NSW, Victoria and Queensland all recorded unit price rises between 5.5% and 6.5% in the regional areas.

The only regional market to record price decline was Western Australia, which dropped both for houses and for units. These figures show that the momentum for a national property boom is already building and indeed that some markets are already surging strongly. The infrastructure-led economic recovery planned by federal and state government will add to that impetus. Few things generate momentum in residential property markets like big spending on new infrastructure and politicians have shown they are willing to put their budgets into debt to fast-track projects that are shovel-ready or close to it. Another big factor likely to put upward pressure on prices is the level of vacancy rates around Australia.

Outside of the inner-city areas, vacancies are very low in most locations and in some they are so low it represents a rental market crisis. The upward pressure on rentals is considerable, particularly when prospective tenants are offering more than the asking price to secure properties ahead of the competition.

A further factor to consider is that the growth achieved in 2020 occurred without much involvement from investors. First-home buyers and other owner-occupiers have dominated – but there are signs this is changing. I expect investors – who, as a cohort, tend to react to market trends rather than lead them – to be a lot more prominent this year and that will further turbocharge property prices. Outside of those inner-city areas, it’s a great time to be a landlord.


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House prices take a breath as affordability crunch bites

House prices

CoreLogic figures show that price growth, nationally, during July was 1.6 per cent. To put that into context, growth during this extraordinary surge in prices peaked at 2.8 per cent in March.

House and apartment prices in Sydney rose an astounding 18.2 per cent over the 12 months to July 31 and were up 10.4 per cent over the same period in Melbourne.

Prices in capital city markets at one point were rising by as much as $400 a day. The median value dwelling in Sydney is now $1,017,692 and $762,068 in Melbourne, CoreLogic’s figures show.

Housing affordability constraints would likely see more slowing price growth in coming months.

Sydney recorded the sharpest reduction in price growth during July, but prices still rose by 2 per cent, down from a peak of 3.7 per cent in March.

The price growth in the country’s biggest city is even more remarkable considering greater Sydney spent the month in lockdown.

Prices in Melbourne rose by 1.3 per cent in July, compared to 2.4 per cent in March of this year.

Sydney is not only the most expensive capital city to buy property by some considerable margin, it has also been the city where values have risen the most over the first seven months of the year, says Tim Lawless, CoreLogic’s research director.

“Worsening affordability is a key contributing factor in the [price growth] slowdown in Sydney, along with the negative impact on consumer sentiment as the city moves through an extended period of lockdown,” he says.

Usually, when affordability starts to tighten, it is those looking to purchase their first homes that are the first to feel the pinch. And that is what we are seeing with first home buyers.

First timers are starting to retreat from the market as cashed-up property investors attracted by the prospects of significant capital gains come into the market in greater numbers.

Even though fewer first home buyer mortgages are being approved, the average size of first home loans is rising, as those who decide to press ahead and buy are forced to pay higher property prices.

CoreLogic figures show the rise in prices of the upper 25 per cent most expensive properties across the capital cities is slowing – another sign of affordability impacting the market.

Lawless says that previous “circuit breaker” COVID-19 lockdowns have generally seen housing values remain resilient, but the number of home sales and listings activity has been more substantially disrupted by the most recent tighter restrictions.

“Once restrictions are lifted, it’s likely pent-up demand will flow through to an increase in activity again,” he said. “However, uncertainty associated with the duration and severity of Sydney’s lockdown could see a greater disruption than in previous periods of restrictions,” Lawless says.

AMP Capital chief economist Shane Oliver expects property prices to keep slowing nationally, with gains of just 5 per cent next year.

Dr Oliver says 2023 could see the start of another cyclical downturn in property prices as the interest rate cycle starts to move up more decisively. Prices could fall by 5 per cent during 2023, he says.


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Three out of four mortgage holders who asked for a rate cut, got one: RateCity


While the majority of changes to fixed rates in the last two months have been hikes, the opposite is happening in the variable rate market

Almost three-quarters of variable borrowers who asked for a rate cut, got one, a new survey has found.

In a survey of over 1,000 mortgage holders, of those on a variable rate, 52 per cent haggled with their bank for a lower rate. Over 73 per cent of these people were successful in getting at least one rate cut.

A rate reduction of 0.25 per cent could save the average mortgage holder $1,241 in interest after one year and $3,656 after three years. This is based on a $500,000 loan balance with 25 years remaining.

While the majority of changes to fixed rates in the last two months have been hikes, the opposite is happening in the variable rate market.


Omnia 4-6 Horscroft Place, Moorabbin VIC 3189 home loan database analysis:

  • 49 lenders have cut at least one variable rate in the past two months.
  • 10 lenders have hiked variable rates in that time.
  • The vast majority of variable rate cuts are reserved for new customers, not existing ones.

RateCity research director, Sally Tindall, said while the RBA is not expected to move the cash rate tomorrow, one phone call could potentially save the average variable rate mortgage holder thousands.

“Variable rates are at record lows, however, most of these deals are reserved for new customers, not existing ones, unless you specifically ask,” she said.

“A lot of people think a handful of basis points won’t make much of a difference, but if the discount is permanent, then the savings can potentially run into the thousands in just a few years.”


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Don’t let FOMO rush you into the property market

property market

Hi Nicole. My partner and I are watching what is happening in the property market and I’m starting to feel desperate. It seems like things are crazy. We have been saving hard for three years for a home deposit but prices are increasing faster than we can save. Should we take the leap now and how can we do it without over-committing? Is there any help – or even just guidance – for people like us? It all seems quite scary. Many thanks, Lauren

It is a little tricky without knowing your deposit amount, target property price or location. However, there are certainly a few concessions and strategies that might help.

A couple of these were courtesy of the May federal budget.

The first is that the First Home Loan Deposit Scheme has another year to run.

A further 10,000 places were announced for the 5 per cent deposit scheme, for which the government guarantees another 15 per cent. That means you can borrow 95 per cent of a property’s value but what the guarantee does is avoid the cost of extortionate lenders’ mortgage insurance. This can be tens of thousands of dollars.

The scheme will apply if your household income is less than $125,000 a year. But you should get in quick as the concessional loans have been going fast.

The other newer initiative of note is the expansion of the first home super saver scheme.

With this one, you can tip extra money into your superannuation fund that is allocated specifically for a house purchase.

You can already pay in up to $30,000 but from July, 2022, the allowable amount will rise to $50,000. You can save this over two years and then withdraw it, plus earnings and less tax.

Inside your super, the tax is lower than your marginal tax rate, so you would amass money for a deposit more quickly.

The above measures add to first-home buyer grants and stamp duty waivers that are available, which differ by state, but can apply to homes you build or buy new. For more information, visit your relevant Office of State Revenue website.

The market is rather manic and you must guard against letting that pressure you into borrowing more than you can afford.

Ordinarily, I would advocate saving a 20 per cent deposit to avoid lenders’ mortgage insurance.

However, in capital city markets, where prices are rising by as much as $400 a day, that looks unrealistic. A more reasonable deposit is probably 10 per cent of the purchase price.

Still, make sure borrowing that amount would not put you into mortgage stress – defined as committing more than one-third of your before-tax household income to housing.

Be aware that under bank lending restrictions, a lender may “stress test” whatever you borrow for 2.5 percentage points of interest rate rises. That could reduce your capacity to borrow.

To make sure you are relaxed and comfortable with what you borrow, just calculate one-third of your after-tax income. You could then jump on an online mortgage repayment calculator and play with what loan size that amount of monthly repayments would cover.

Perhaps use an interest rate of 2 per cent, although the best quality loan in the market with a mortgage offset account is just 1.89 per cent.

Do your utmost to limit your borrowings. And, most importantly, remember that the time to buy is when you are ready – not when rushed.


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