If 2020 taught property pundits anything, it’s to expect the unexpected.
Australia’s first lockdown encouraged analysts to forecast a double-digit dip in the housing market.
But as we know, those predictions failed to transpire and prices – which are only 0.7 per cent below pre-pandemic levels – are on the up.
So, what does the future hold for a market that defied expectations?
When The New Daily asked a select group of experts for their predictions on how prices would fare in 2021, none would provide a figure.
However, they explained some of the key things to look out for.
Regions will continue to grow
BIS Oxford Economics chief economist Dr Sarah Hunter said if local coronavirus cases remained under control and unemployment remained stable, regional areas and detached houses in smaller capitals should continue to streak ahead.
She said there was still plenty of residual demand from buyers capitalising on buyer’s grants and stamp duty concessions, while fighting a sense of FOMO.
“Falling interest rates improved affordability which helped demand, but supply hasn’t responded all that much yet as the volume of transactions – although they are turning – have not risen anywhere near as much,” Dr Hunter told The New Daily earlier this month.
“In terms of long-term sustainability, there’s still demand shock around [reduced] migration, which will likely make apartments cheaper.”
Struggling investors could also play a role
That’s a sentiment shared by Suburbanite director Anna Porter.
She believes prices for off-the-plan units – or high-rise apartments – will go backwards.
She said it’s largely due to investors wary about the health of capital city rental markets and unlikely to purchase property as demand from international students remains sluggish.
Which, consequently, would drag down both demand and prices.
The exodus of renters at the height of the pandemic, when tenant-heavy industries were hit by job losses, drove vacancy rates in some capitals above 4 per cent.
And data from APRA shows investors have been slow to resume their repayments. Recent analysis by the financial regulator found one-third of deferred loans at the big four banks in October were investment loans.
“There could be a bloodbath that comes to fruition in a short compressed timeframe if people sell in quick succession in areas that don’t have undersupply issues,” Ms Porter told The New Daily.
Impact of deferrals unlikely to be as strong as predicted
Figures from the Australian Banking Association show deferred loans plummeted from 493,440 in June to 169,677 in November – a 66 per cent reduction.
CoreLogic head of research Eliza Owen told The New Daily she expected house prices to continue rising in the first half of 2021, ahead of the conclusion of loan payment holidays.
And other measures are also outweighing any negatives, she said.
Those include historic rate cuts and programs such as HomeBuilder and the First Home Loan Deposit Scheme.
“The only thing worth noting is when you see incentives for first home buyers, for example, it tends to have a vacuum effect where purchases that may have happened anyway are pulled forward,” Ms Owen said.
“Once these schemes run out, we may see demand slow a little bit, and the other thing that could slow price increases is APRA intervention.”
Plenty of bargains likely to be found in apartments
Wakelin Property Advisory director Jarrod McCabe said despite a number of home owners on deferrals as a precautionary measure, suburbs where international students traditionally flocked may become “unstable”.
Those include inner-city areas, middle-ring suburbs near universities and locations where investors converted short-term accommodation en masse into long-term rentals.
“If you’re wanting to be an owner-occupier, it spells opportunity because there could be relatively cheap properties, but whether they’re the right types of property is another matter,” Mr McCabe told The New Daily.
Article Source: thenewdaily.com.au
Knockdowns and urban sprawl: Four property predictions for 2021
The property market was nothing short of unpredictable and difficult to read through 2020.
Yet we look to be entering a year where all the economists and property research houses are predicting positive growth across all markets. Who would have thought?
There will be anomalies, of course, but here are the trends you can count on in 2021.
Affordability and lifestyle: Regional centres within 90 minutes of Sydney and Melbourne
Housing unaffordability has been driving this social trend and COVID-19 has come along and really amplified it.
With densely populated cities more expensive and harder to navigate, and in some cases, due to lockdowns, not offering the quality of life we all crave, many saw 2020 as a year to reflect and redirect themselves to outer regions where price point and lifestyle is more favourable.
We already see this in Queensland, where only 48% of the population live in the capital city of Brisbane and the rest is dispersed out to major hubs such as the Sunshine Coast and the Gold Coast, Toowoomba, Ipswich and many more.
For context, 76% of Victoria’s population live in Melbourne, while Sydney sits at 65%.
The towns must have adequate transport and ease of access to main arterials.
Getting to the capital cities will still be important for these sea and tree changers, as will the central location within the town.
Walkability and education are important for families as are healthcare services for downsizers. Keep this in mind when assessing the property itself.
These regions are also sought after by investors who are keen to establish a ‘foothold’ in one of the holiday regions, such as Daylesford, the Mornington Peninsula or the Bellarine Peninsula.
With a number of factors — such as less overseas holiday travel, low-interest rates and less commuting — allowing for more cash in the bank and a greater focus on what matters most, families want to secure an ‘escape property’ for themselves, a destination they can flee too should lockdowns or pandemics strike again.
More ‘knockdown and rebuild strategies’ in the middle-ring suburbs
According to McCrindle Research, 78% of people surveyed believe working from home is here to stay with most expecting this to be two or three days a week.
But how many of us actually have the space to do this, especially in dual-income houses?
Renovations can be expensive and unpredictable.
Whereas the growing trend of knocking down an old 150 square metre, 1950s–1970s weatherboard or brick home, on 400–800 square metres of land, and replacing it with new build, can not only solve the working-from-home problem, but also result in a very profitable project.
Our smaller cities take flight
With less interest in moving to the big smoke from our smaller cities, natural-born residents will consider staying put and working in their home cities while the uncertainty is around.
The big question is, how compelling will this be in the long term?
The big cities of Melbourne and Sydney house our largest institutions, banks, insurers, super funds and the head offices of most major corporates outside of mining and resources.
They will eventually draw talent from interstate and overseas, and although moving home to Adelaide or Brisbane might be possible if you’re already employed, landing a job from interstate and never being in the office is quite difficult, even impossible.
In summary, the smaller cities of Perth and Adelaide will be strong next year as residents stay put or head home, but in the long run, Melbourne and Sydney will prevail and deliver superior return on investment as they offer higher paying jobs for more people and this drives the property market.
Is the inner-city out of favour?
Apartments are not one property style on their own, there is low rise, high rise, concierge, and facilities, versus art deco walk-ups, with no lift, with plenty of character and charm.
And many more versions of these lifestyle-driven properties are often bought for convenience and affordability.
Generally speaking, the bigger buildings will suffer, although locations such as East Melbourne and Spring Street in Melbourne’s CBD are always sought after and rarely drop in value.
But is this the best place to invest in 2021?
No! Houses will always outperform in the inner-city regions as they are not building them anymore, if anything they are slowing decreasing in numbers to make way for apartments and townhouses.
It’s a simple supply and demand equation.
Expats will be heading home and if returning from New York, London, Hong Kong and LA will be used to the cosmopolitan lifestyle and see the capital city lifestyles as less congested and more liveable than where they’ve come from.
This influx of established wealth will make up for any city escapers who are selling down or moving to the regions.
The cities will bounce back and continue to be our central place of business, leisure and events.
The beautiful established parks and gardens, along with the best food and experiences in town, will draw people back. Plus, being ‘central’ with quick access to the best schools, arterials and major shopping hubs will mean these 3–10km regions will be highly sought after.
Article Source: www.smartcompany.com.au
Queensland’s booming real estate market to go on for ‘years to come
Wealth management firm Morgans has tipped house prices to continue to rise throughout 2021 and possibly for “years to come’’.
The forecast follows a strong December in the real estate market with Ray White recording $4 billion in unconditional sales in the month in Australia. Almost $1 billion of that was in Queensland.
Morgans Stockbroking economist Michael Knox said the recovery in house prices was healthy.
“It has years to run as full-time employment recovers over the next few years with the coming business cycle,’’ he said.
The likelihood of interest rates rising was also low with Knox believing that the Reserve Bank would struggle to achieve its inflation target until unemployment was below 5 per cent.
“It will take years to achieve that level of unemployment. It is very unlikely that inflation is going to be a problem during this period. Our view is that full employment in the Australian economy is at 4.5 per cent.
“We think it’ll take not less than four years for growth to get unemployment down to that level.’’
Ray White managing director Dan White said its December total sales of $6 billion were up 60 per cent on the same time in 2019.
“In Australia alone, we recorded almost $4 billion in sales, up 50 per cent, with a record result in Victoria to cap off an incredible recovery given extended lockdowns across that state. New Zealand recorded its sixth consecutive record month, with $1.9 billion in sales which was 87 per cent higher than last year
The Real Estate Institute of Queensland’s vacancy data for the December quarter showed Brisbane’s inner city rental market was recovering and was now “the only healthy rental market in Queensland”.
Rental vacancies were now at 3.3 per cent, down from 5 per cent previously.
Beyond Brisbane’s CBD, rental vacancies around the city’s middle ring remain extremely tight, with a quarterly rate of 1.6 per cent including Hawthorne (1.4 per cent), New Farm (1.9 per cent), Paddington (2.1 per cent) and St Lucia (1.7 per cent).
Further out into Brisbane’s outer ring and vacancies are even tighter, recording a quarterly rate of 1.3 per cent.
Article source: inqld.com.au
Low interest rates could cause property prices to rise 30% – RBA
Analysis by the Reserve Bank of Australia suggests house values could jump 30 per cent over three years if borrowers believe the cut in interest rates is permanent.
An internal RBA document released on Friday in response to a Freedom of Information request says that while the RBA is on alert for current ultra-low borrowing costs inflating a credit-fuelled asset bubble, so far, the central bank believes lending standards are prudent.
While our financial regulators are ready to act if necessary, apparently they don’t see rising house prices as a major risk.
Part of the reason the RBA is comfortable is that currently much of the housing demand is coming from owner occupiers including first homebuyers, rather than investors.
he RBA recognises that low interest rates will lift asset prices, but they believe in turn will increase wealth and household spending.
If anything the RBA see the biggest risk to the economy being high unemployment, but they suggest our stronger household balance sheets from low interest rates could help counteract the danger.
But there’s more than low interest rates that are going to fuel our property markets this year…
The number of properties for sale in Australia is beginning to dry up.
Currently property buyers are heading back into our housing markets in droves, keen to get a foothold before property values surge.
But they are finding limited stock, with 7 of our 8 capital cities having significantly less properties for sale than 12 months ago.
Strong demand at a time of limited supply must lead to property price growth.
But don’t get lulled into a false sense of security by our rising property markets.
As always correct property selection will be critical for the long-term performance of your investments.
Location will continue to do around 80% of the heavy lifting, so don’t compromise.
You can’t expect to get top investment performance from a secondary property.
Article Source: propertyupdate.com.au
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