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Australian house prices to rise by 15 per cent this year but slow in 2022

Australian house prices

Australian house prices will rise by 15 per cent by the end of the year before slowing to just 5 per cent in 2022, a new Westpac Housing Pulse has revealed.

The quarterly report, released this week, revealed markets across Australian capitals are in a “fully fledged, broad-based boom”.

Westpac senior economist Matthew Hassan said all aspects of the market were showing outright strength, with turnover 30 per cent above the national pre-COVID peak.

Prices are 8.5 per cent above their pre-COVID highs, pushing record levels in most markets.

“Everyone is out there looking for any hint of a moderation to this boom,” Mr Hassan said. “So far, there is nothing really that convincing – auction clearance rates have come off slightly, but we are only talking about 2 per cent or 3 per cent and still running around 80 per cent.

“There is nothing but a slight cooling off from ‘red-hot’ to ‘hot’ at best, and it is not really a sign things are about to turn cold,” he said.

The strength of the market had been surprising, but could not continue at such a fast pace, especially if home buyers could no longer afford to get into the market, Mr Hassan said.

“We’ve been pretty amazed by some of the strength the market has shown throughout 2021,” he said. “We do expect it to slow because you can’t expect such vigorous price gains without people’s ability to service a loan [being affected].”

The Reserve Bank and Australian Prudential Regulation Authority (APRA) would be concerned once property prices rose by 15 per cent, which was why Westpac expected some form of macro-prudential intervention in the first half of next year.

That could include tightening the loan-to-value ratios or a cap to investor credit growth, Mr Hassan said.

“It will be a soft landing really — 5 per cent growth is very gentle,” he said.

Strong price gains were happening across all capital cities, particularly Sydney, during the coronavirus pandemic, setting it apart from other housing booms in Australia.

“In previous price rises two to three cities propelled the gains each time, one cycle was Sydney and Melbourne and the cycle before that was the mining states with one or two cities sitting it out,” Mr Hassan said. “That’s just not happening now because all cities are booming.”

Meanwhile, a Finder RBA Cash Rate Survey of 40 experts and economists, released Monday, revealed the average house price could rise by 21 per cent in Sydney — or $216,300 — in 2021.

Over the next six months, that rise is expected to be about 8 per cent.

Finder head of consumer research Graham Cooke said Sydney’s property market  continued to soar to record breaking levels.

“To put that into perspective, prices rose by just 4 per cent in 2020 and 2019, and dropped by 8 per cent in 2018,” Mr Cooke said. “A 21 per cent  increase would be the highest annual increase for the Sydney property market in recent history, beating the previous record of a 15 per cent rise in 2013.”

2021 price change predictions by state

Capital city Price change prediction June-Dec 2021 Total 2021 price change current and future Average house price December 2020 Total 2021 average price change 2021 Predicted average price change by December 2021
Sydney 8% 21% $1,030,000 $216,300 $1,246,300
Melbourne 7% 15% $806,000 $120,900 $926,900
Brisbane 7% 17% $581,000 $98,770 $679,770
Perth 8% 15% $530,000 $79,500 $609,500
Adelaide 6% 13% $511,500 $66,495 $577,995

Brisbane’s house prices were expected to jump by a massive 17 per cent, or by $98,770, while Melbourne’s were expected to rise by 15 per cent, or by $120,900, by the end of the year.

Perth’s property prices were also expected to rise by 15 per cent in 2021, and Adelaide’s by 13 per cent.

Six-month predictions for Canberra and Hobart saw prices tipped to rise by 7 per cent and by 6 per cent in Darwin, the Finder survey revealed.

While price booms were still predicted for the rest of this year, there are challenges ahead, Westpac’s Mr Hassan said.

The “sleeper issue” for Australia’s property market was the continued closure of international borders to new migrants.

“We have a sharply slower population growth and sharply lower physical demand for new dwellings,” Mr Hassan said.

With HomeBuilder seeing many new homes to be built over the next 12 months, Australia could start to see a rise in vacancy rates.

While Sydney and Melbourne had seen a rise in inner-city vacancies, this was part of the initial “COVID-19 shock,” Mr Hassan said.

“The HomeBuilder balance of supply and demand will see housing shift away from shortages and that could hit next year,” he said.


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Best and Worst Suburbs For Rental Properties Revealed

rental properties

Australia’s rental Properties is tightening, finally reaching pre-Covid levels, however some suburbs are faring better than others.

The vacancy rate fell in May for the second consecutive month and now sits at 1.7 per cent. The last time rates were this low was February, 2020 according to research by Domain.

The report showed Sydney’s vacancy was at March, 2020 levels and Melbourne, while considerably high, was rapidly falling from its 5.4 per cent peak in December last year.

Adelaide and Brisbane had the lowest level of vacancy since the records began in 2017 while Canberra and Perth were close to record multi-year lows.

Worst places for rental property owners

Rank Sydney Vacancy Melbourne Vacancy Brisbane, Gold Coast Vacancy Perth Vacancy Adelaide Vacancy
1 Paramatta 4.6% Melbourne City 8.6% Brisbane Inner 3.4% Perth City 1.4% Adelaide City 4.7%
2 Auburn 4.4% Stonnington-East 7.8% Sherwood-Indropilly 2.5% Cottesloe-Claremont 1.5% Prospect-Walkerville 0.9%
3 Strathfield-Burwood-Ashfield 3.9% Whitehorse-West 6.1% Brisbane Inner-West 2.3% South Perth 1.1% Holdfast Bay 0.9%
4 Canterbury 3.9% Stonnington West 5.8% Nathan 2.2% Belmont-Victoria Park 1.1% Norwood-Payneham-St Peters 0.8%
5 Ku-ring-gai 3.2% Boroondara 5.6% Mt Gravatt 2.1% Canning 1% Burnside 0.7%

Best places for rental property owners

Rank Sydney Vacancy Melbourne Vacancy Brisbane, Gold Coast Vacancy Perth Vacancy Adelaide Vacancy
1 Camden 0.3% Yarra Ranges 0.2% Capalaba 0.2% Kwinana 0.3% Gawler-Two Wells 0.1%
2 Blue Mountains 0.4% Nillumbik-Kinglake 0.4% Caboolture Hinterland 0.3% Wanneroo 0.4% Marion 0.1%
3 Wyong 0.4% Maroondah 0.4% Nerang 0.3% Serpentine-Jarrahdale 0.4% Playford 0.2%
4 Gosford 0.6% Cardinia 0.4% Coolangatta 0.3% Cockburn 0.4% Tea Tree Gully 0.2%
5 Campbelltown 0.6% Mornington Peninsula 0.5% Wynnum-Manly 0.4% Swan 0.4% Salisbury 0.2%

^Source: Domain rental vacancy report, May 2021

Despite performing relatively poorly, Melbourne vacancy rate tightened more than any other capital, from 4.2 per cent in April.

Domain senior research analyst Nicola Powell said extended lockdowns in the state would impact the city.

“Vacant rental listings may increase in regions with a high proportion of people working in the hospitality and tourism sectors,” Powell said.

“Those who have had a significant reduction in hours may be forced to cut costs and move in with family or friends.

“Vacancy rates are also likely to remain particularly weak in areas with a higher proportion of short-term rentals as ongoing outbreaks affect interstate travel and sentiment towards travelling to Greater Melbourne.”

Home owners in Melbourne were trying to get ahead of the curb with the rate of homes selling before auction doubling.

Meanwhile, in a rare occurrence, house prices were on the rise in every capital city during May and 97 per cent of sub-regions.


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House Prices Up Again in Synchronised Upswing

House Prices

House prices are continuing to surge with prices up 14.3 per cent in a year as the national market has a rare “synchronised upswing”.

The only things that could slow the market are affordability constraints and tighter credit policies, according to Corelogic’s monthly home value index.

In May, dwelling values rose 2.2 per cent across capital cities, however, this was slightly weaker than March when prices increased 2.8 per cent, breaking a 32-year record.

Sydney had the strongest price growth at 3 per cent while Perth lagged behind at 1.1 per cent and the Melbourne market held on at 1.8 per cent as the state went into lockdown again.

Corelogic house prices: May

Month Quarter Year
Sydney 3.0% 9.3% 11.2%
Melbourne 1.8% 5.5% 5.0%
Brisbane 2.0% 6.2% 10.6%
Adelaide 1.9% 5.4% 11.8%
Perth 1.1% 3.8% 8.5%
Hobart 3.2% 7.7% 16.5%
Darwin 2.7% 7.9% 20.3%
Canberra 1.7% 6.5% 15.6%
Capitals 2.3% 7.1% 9.4%
Regional 2.0% 6.5% 15.2%
National 2.2% 7.0% 14.3%

^Source: Corelogic home value index May 2021

Corelogic research director Tim Lawless said of the 334 sub-regions analysed, 97 per cent recorded a lift in the past three months.

“Such a synchronised upswing is an absolute rarity across Australia’s diverse array of housing markets,” Lawless said.

“Despite the consistently strong headline results, the underlying trends have shifted during the past year.

“The most expensive end of the market is now driving the highest rate of price appreciation across most of the capital cities, whereas early in the growth cycle it was the most affordable end of the market that was the strongest.

“It was the smaller capital cities that led the housing market out of the Covid-19 slump, but now Sydney has risen through the ranks to record the largest capital gain during the past three months with values up 9.3 per cent.”

However, the increased prices are continuing to put pressure on affordable housing in Sydney with the NSW productivity commission finding a lack of housing was limiting the number of workers available.

Lawless said that for now, Australia remains firmly entrenched in a housing boom and will continue to rise in 2021 but will slow down as affordability affects market participation.


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Brisbane Airport’s $1bn Third Terminal

Brisbane Airport

Brisbane Airport has unveiled plans to build a $1-billion third terminal that will connect its dual runways.

The proposed terminal will be a 250,000sq m integrated L-shaped building that services both domestic and international operations, positioned between the two runways.

While the airport’s design hasn’t been finalised it will be put before Brisbane Airport Development and Design Integrity Panel as well as up for community consultation before being signed off on.

Brisbane Airport Corporation (BAC) said the development would be marked for completion in 2032, however, the timeline would be moved forward if Brisbane was confirmed as the host of the 2032 Olympic Games.

“Brisbane Airport has been blessed with two great pieces of terminal architecture in the current domestic and international terminals,” a Brisbane Airport Corporation (BAC) spokesperson said.

“[The new terminal] will be a modern, sustainable green building that harnesses the best of Queensland—its sunshine—alongside engaging retail options and touchless, self-service operations.

“It will also open up new international route opportunities like we saw with Chicago and San Francisco pre-Covid.”

Brisbane, currently Australia’s third-busiest airport spanning a 2700-hectare site, recently completed the construction of its $1.3-billion, 3.3km second runway.

The new runway has now given the airport the largest aviation capacity of any city in Australia, allowing for up to 110 aircraft movements per hour, comparable to major international hubs like Singapore Changi Airport and Hong Kong International Airport.

Brisbane Airport Corporation is also set to spend another $2 billion on major projects over the next five years.

“The aviation industry is resilient and has weathered many storms,” head of infrastructure development Paul Coughlan said.

“Air travel will bounce back, as it did after the 11 September 2001 terror attacks and the global financial crisis. It has always rebounded, and it rebounds strongly.

“Now more than ever, it is crucial that we have the infrastructure and mechanisms in place to allow our great city and state to recover from Covid-19.

“As we emerge from the pandemic, Brisbane Airport will be in the best position possible to attract new airlines and new routes, connecting Brisbane to the world more than ever before.”

Along with a new northern integrated domestic and international terminal, BAC wants to connect the airport precincts together with a new Australian-first airport mass transit system.

As part of the Brisbane Airport 2020 masterplan, BAC is planning a mass transit system that could handle the forecasted 50 million passengers and 50,000 workers that will transit through the Airport precinct by 2040.

According to BAC, an elevated air-train transit system could handle 3200 passengers per hour and take no longer than five minutes.


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