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Forecasting property prices and what affects property in 2021, 2022 and beyond

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What’s the outlook for the Australian property markets for 2021 and beyond?

This is a common question people are asking now that our real estate markets are up and running again after virtual auctions and sight unseen purchases took place in 2020.

News from the biggest banks and Australian economic experts are predicting house price growth across almost every segment of the market.

Those I spoke to, and who have released forecasts of their own, are predicting property price growth of 12 per cent per cent – 20 per cent per cent across Australia this year. They expect the trend will almost certainly continue until the end of 2022.

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, which means double-digit price growth is on the horizon for many areas around Australia in 2021.

AMP Capital’s Shane Oliver in particular said, “the forces that have driven average Australian capital city property prices well above trend and well above price-to-income ratios seen in comparable countries over the last two decades may be at, or close to, having finally run their course.”

We’ve taken a look at a handful of the state capital property markets, how they’ve performed since COVID hit, and what is being forecast to the end of 2021.

Brisbane Forecast

Brisbane’s house prices remained resilient over 2020 when other markets were impacted by the economic impact of COVID-19.

Now, moving forward, the Sunshine State will shine with strong demand for homes, particularly in lifestyle areas, likely to deliver double digit capital growth over the next 12 months.

Brisbane apartment values have increased 2.7 per cent over the quarter, in line with 6.2 per cent in the year to date.

Median apartment values have hit a high of $419,143.

Several of the economists I spoke to including Terry Ryder and Westpac’s Bill Evans tipped housing prices to surge 20 per cent between 2022 and 2023.

Hotspotting’s Terry Ryder clarified that 89 per cent of suburbs across Brisbane are seeing price growth and was tipping it to become Australia’s property leader in the coming months and years.

It’s also worth keeping in mind the Brisbane 2032 Olympics which will positively impact property values now and in the future.

Overall, experts forecast property prices will rise roughly 16 per cent by 2021’s end.

bide

Bide 21 Longland Street, Newstead QLD 4006

Canberra Forecast

Canberra’s property market has been described by many as a “quiet achiever” with dwelling values reaching a new peak after growing 14.2 per cent over the last year.

Considering a large percentage of Canberra’s population is employed by the government or industries supporting the public sector, Canberra’s property market has not really felt the effects of the coronavirus recession like other capital cities did.

Due primarily to the ongoing apartment developments popping up across Canberra, like those from Geocon, unit values are up 1.3 per cent this month, making up a large chunk of the 2.8 per cent price growth this quarter. Apartment prices are up 6.5 per cent in the year to date.

Median apartment prices are currently $520,900.

Moving forward, the Canberra property market will continue to enjoy solid but slower property price growth, due primarily to slow population growth.

Overall, experts forecast property prices will rise roughly 17 per cent by 2021’s end.

Perth Forecast

Perth’s long-awaited recovery was interrupted midway by COVID-19 but now Perth’s housing market is back on a recovery trajectory, with home values posting a 7.5 per cent increase in the year to date.

Perth continues to be the most affordable capital city for houses in the country and this along with a record-low mortgage rate, improving economic conditions and government incentives has set it up for strong price growth this year.

This has also seen strong benefits for the apartment market which has been neck and neck with houses and even outperformed them this quarter, seeing 2.3 per cent growth compared to 1.5 per cent. Units were up 0.6 per cent for July, while houses saw growth of 0.3 per cent.

Apartment values are up 6.8 per cent since January achieving a median price of $404,257.

Overall, experts forecast property prices will rise roughly 19 per cent by 2021’s end.

How does my property impact the economy?

Real estate affects the economy because it makes up a large portion of individual and business wealth across economic sectors.

When real estate prices rise, wealth increases, so individuals and businesses are more likely to borrow and spend.

This can be seen in recent times with the average Australian savings account decreasing ~$7,000 from May to April as prices start to spike, however this can also be largely attributed to a reducing fear of COVID-19

When your home rises in value it increases the overall value of the economy. When real estate prices rise, wealth increases, so individuals and businesses are more likely to borrow and spend.

What’s causing the rise in home prices?

The primary factor causing the current boom in home prices are the continuing low mortgage rates and low interest rates.

Plus with Australia’s excellent response to Covid 19 transmission seeing business reopening well and an increasing optimism for the economy there is much less fear around COVID-19.

With fewer homes for sale and first time home buyers and owner occupiers (those buying a property to live in it) dominating the market, they are currently the ones driving up property prices the most.

However as incentives like those from the HomeBuilder Grant and First Home Buyer Grant taper off it is expected that we will see a massive uptick in investor spending on property as they compete with owner occupiers and first home buyers over the super competitive interest rates.

It is predicted that Investors will drive the market well into 2022 and perhaps even 2023 depending on other conditions that influence interest rates like the cash rate.

How does the Cash Rate influence the Interest Rates on my loan?

You often hear about it in the news, the monthly changes in the Cash Rate, but what is the cash rate and how does it affect you?

In essence the Cash Rate which the RBA meets on to decide once a month (currently 0.15 per cent) changes how much money banks can lend to you.

So when the cash rate is extremely low – close to zero – as it is currently, banks can and are encouraged to offer lower interest rates.

That means when the Cash Rate is low, Variable and Lock-In Interest Rates are low so your mortgage is cheaper!

This can save you hundreds to thousands of dollars a year depending on the value of your home.

With all that covered, every expert I talked to predicts that the cash rate will not decrease any time in the next 2 years and most experts expect the cash rate to increase in 2023 or later.

However three of the Big 4 banks have already started hiking interest rates across the range with Westpac the only one yet to start showing upward movement. It’s a sign of the times with a number of other banking and loan institutions also increasing interest rates across a wide range of home loans.

How does the government affect property prices?

Legislation is also a factor that can have a sizable impact on property demand and prices.

Tax credits, deductions, and subsidies are some of the ways the government can boost demand for real estate for as long as they are in place.

Some recent examples of this include the HomeBuilder Grant and the First Home Buyers Grant.

Being aware of current government incentives can help you determine changes in supply and demand and who and what will be affecting property prices.

An example of something to look out for is the percentage of properties purchased by FHB’s (First Home Buyers) soaring to record highs recently. Although this still remains the case, it wont forever and certainly is not predicted to last into 2022.

 

Article Source: www.urban.com.au

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Brisbane

Brisbane’s western suburbs rents skyrocket by 20 per cent-plus

Soaring demand for affordable family-friendly homes close to schools and parks has sparked a rental boom across some of Brisbane’s leafy western suburbs, with prices climbing by up to 20 per cent in just 12 months.

The latest Domain Rent Report, released last week for the September quarter, revealed the steepest rent hikes were collected in the middle and even outer city rings of the Queensland capital, with Mount Ommaney claiming the crown for top performer after house rents there rose a massive $138 per week to $690 over the last year.

Cornubia, Fig Tree Pocket and Seventeen Mile Rocks were all hot on its heels after rents rose 19.9 per cent to $535, 17.2 per cent to $700 and 16.1 per cent to $560, respectively. Houses in Scarborough, in the bayside north, saw an increase of 16.3 per cent bring weekly rents to $465.

In the nearby bayside suburb of Woody Point, units topped the leader board after rents jumped 15 per cent to $345, with Camp Hill – in the coveted inner east – winning the silver medal after a 13.9 per cent rise raised weekly prices to $410.

Brisbane’s western suburbs

Rentals in highly sought-after inner-city locations like Camp Hill have gone up in price substantially over the past year. Photo: Place Bulimba 

While rents across the city collectively rose to record heights in the September quarter, not all suburbs posted positive growth. House rents in South Brisbane suffered an annual 8 per cent drop to $460. Grange house rents, in the city’s north, also took a dive of 7.6 per cent to $550, with Manly in the bayside south suffering a slump of 5.1 per cent to bring house rents to $490.

In units, the worst-performing suburbs were Sunnybank and Macgregor, which suffered price drops of 5.1 and 4.8 per cent to bring weekly rents to $370 and $400, respectively.

Despite the price fluctuations, the individual suburb data has revealed a growing shift towards affordable lifestyle suburbs amid a new set of rent conditions that Place Estate Agents director of property management Cathie Crampton said were, more than likely, here to stay.

“Demand in the city’s lifestyle suburbs [is higher than ever] and we are seeing people moving to places like the bayside now,” she said. “The typically traditionally strong rental suburbs of Norman Park and Bulimba are still going through the roof in terms of both rentals and sales … but our most improved suburbs are Graceville and Indooroopilly, where people want to move into those school catchments.

“And that’s where we’ve had 0 per cent vacancy in our rent roll.

Brisbane’s western suburbs

Bulimba: The number one pick for renters. Photo: Supplied 

“But our best performing suburb has still got to be Bulimba,” Ms Crampton said. “It has continued to perform and we’ve had one of the lowest vacancy rates in that suburb for over nine months now.”

According to the Domain report, Bulimba is now the city’s most expensive suburb to rent a house after a 9.3 per cent annual hike sent weekly asking prices to $765.

Kenmore Hills came in at second place after prices rose 7.6 per cent to $710.

While the city’s blue-chip suburbs saw more subdued growth over the past year, it was the hunt for an affordable home close to amenities that sparked the price surge in Mount Ommaney, said Ray White Centenary letting manager Debbie Swales, with the suburb undergoing a coming-of-age off the back of a booming sales market.

“It’s certainly picked up a hell of a lot and when I get a good property – particularly a good family home now – people are desperate,” she said. “There are just too many people needing to rent and it’s mostly because house prices have gone up so much.

“Queensland is just really booming because there’s a lot of push from down south … but I think with Mount Ommaney, in particular, it’s a beautiful suburb and the rent is not astronomical compared to other suburbs. Then you’ve got the shopping centre, it’s really safe and there are the parks and the river.

“I’m now getting people ringing me from the Sunshine Coast and from even the north of Brisbane and they say they are moving here because it’s close to the city but also Ipswich – it’s just so accessible.”

It’s a sentiment shared by Ray White Holland Park department manager Kaitlyn Schneider, who said rents had jumped by up to $150 in the past six months alone as tenants moved further out from the city.

“I think we’ve got great access to the highway … and we’re still affordable and that’s bringing so many people to these places,” she said. “I would say Holland Park to Camp Hill and the pockets between [are on fire].”

The rental renaissance has swept across the city’s once-stigmatised Redcliffe region, said One Agency Redcliffe and Northlakes principal Stephan Siegfried, with prices soaring to record heights off the back of a pandemic-induced lifestyle shift.

“With COVID, people have rediscovered this area – and that happened particularly when we had distance restrictions [last year],” he said. “At one point Margate Beach was like Bondi – you couldn’t move and there were tents and people sunbathing. So Redcliffe has been discovered.

“People have realised this is a great place to be and we’re close to Brisbane. But the other thing that has happened [to push up prices] is the rental stock has been shrinking somewhat because landlords have cashed in on properties, and that’s shrunk the pool a bit.

“And now we’ve got people who have been priced out of the market and have to go further afield,” Mr Siegfried said. “In fact, we’ve seen a large jump in prices and that’s visible and there’s a social disturbance for long-term Redcliffe residents who have lived in affordable properties and are now finding that’s no longer the case.

“While for investors this is great – and I’m really excited because this is a coming of age for Redcliffe – about 12 days ago we had an elderly woman in our office who was in tears because she said she couldn’t afford to live here anymore. So there are two sides to the story.”

The Domain report revealed house rents on MacLeay Island, in the bayside south region, soared by 19.3 per cent over the past year to $325, while Margate house rents rose by 12.5 per cent to $428, with Redcliffe houses rising by 10.5 per cent to $420.

As for Brisbane’s cheapest suburb to rent a house, the report showed the outer pocket of Russell Island boasted a meagre weekly rent price of $300, despite prices rising by 15.4 per cent over the past year.

For units, Sandgate was the city’s most affordable suburb at $255 per week, with prices sliding a slight 1 per cent over the past 12 months.

 

Article Source: www.domain.com.au

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Brisbane

House prices to rise 22 per cent this year, and grow further next: Westpac

Westpac has tipped property prices to rise by more than 20 per cent this year, increasing its price forecast yet again as the market continues to boom despite extended lockdowns.

The bank expects property prices to climb 22 per cent this year, up from a forecast of 18 per cent, and has also lifted its outlook for next year from 5 to 8 per cent.

However, it has warned the property boom is entering trickier territory, with a correction expected from 2023.

Senior economist Matthew Hassan said the property market, fuelled by record low-interest rates, had blasted past price expectations – going well above earlier forecasts for 15 per cent growth this year – with only a slight dampening effect from the latest COVID lockdowns.

Prices rose across the country another 1.5 per cent in September, taking the nation’s median dwelling price to almost $675,000, according to the latest CoreLogic figures. Values are up 17.6 per cent since January, and more than 20 per cent over the past year, marking the fastest annual growth seen since 1989.

Mr Hassan expects prices in Sydney to jump 27 per cent before the end of the year, with values in Brisbane and Hobart also expected to climb more than 20 per cent. Annual price growth of 18 per cent is forecast for Adelaide and Melbourne, and 15 per cent growth is tipped for Perth.

House prices ANZ also expects national growth of more than 20 per cent, revising its forecasts upwards in recent months, while CBA increased its forecasts to 20 per cent, and NAB forecast 18.5 per cent growth back in July.

Westpac’s increased forecasts come after the Australian Prudential Regulation Authority (APRA) announced banks had to lift the buffer rate applied to loan serviceability assessments from 2.5 to 3 per cent, which is estimated to reduce maximum loan sizes by about 5 per cent.

The move came earlier than expected, Mr Hassan said, though he felt its impact on the market would be marginal, given more than 80 per cent of borrowers were not taking out the maximum loan size available. However further tightening of lending restrictions, such as a crackdown on high debt to income ratios, may have a bit more of an impact – particularly on investors with multiple properties.

Still, he expected investor activity to lift from its comparatively subdued levels – accounting for just 25 per of the value of loans over the last 12 months, compared to close 40 per cent over loans over 2015-17 – as affordability constraints squeezed out owner-occupiers.

“That is the real risk factor for the market. The investor segment has been pretty subdued throughout the boom so far… but if there’s a segment that’s going to sustain the boom for longer it’s likely to be investors,” he said, which could drive more persistent price gains near term but also result in a more material correction.

“This is the pointy end of the price cycle, where affordability strains start to price people out of the market altogether, and even if you do have investors coming in in a big way that’s a riskier environment in terms of sustainability in price gains and the tolerance of regulator. We are getting into much trickier territory and the policy side of things is now in play.”

Already,  the Sydney and Melbourne markets are 18 per cent and 10 per cent, respectively, above their previous price peaks in 2017-18, a time when both had major affordability problems.

Mr Hassan expects the market to have run out of steam by 2023, forecasting a pullback of 5 per cent as official interest rates rise – though the Reserve Bank still has the first cash rate hike pegged for 2024.

“Even though rates will still be low, it’s about the shift in the direction …the sentiment will be that there is no more scope for [rapid] price growth … and I think that will be the thing that tips us over into a correction,” he said.

Dwelling completions, at a time of low population growth, could also weigh on prices, he added, with more than 200,000 dwellings completed this year – more than double the increase required with slower populating growth.

Oversupply had so far been limited to certain pockets, given the prolonged period of underbuilding that proceeded the latest building cycle, but that may shift if the return to significant net migration inflows takes several years to come through.

 

Article Source: www.domain.com.au

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Brisbane

Queensland tenants secure more rights

Queensland

The Housing Legislation Amendment Bill 2021 was approved earlier this month

Legislation has passed in the Queensland parliament that will provide more rights to tenants in coming years.

The new laws enact minimum quality standards for Queensland’s 1.8 million renters starting September 2023.

They disallow property owners from issuing a notice to leave ‘without grounds’ providing tenants with more certainty.

They allow tenants to have pets within rental properties in certain conditions. The pet clause commencement date is not yet known, but the changes to renting with pets will allow a property owner to refuse a pet on prescribed reasonable grounds that cannot be addressed by prescribed reasonable conditions.

Trellis 20 Edmondstone Street, South Brisbane QLD 4101

The laws requires owners to consider the specific circumstances or the specific attributes of a pet request and deter blanket “no pets” rules.

They extend protection for renters who have experienced domestic and family violence.

The Palaszczuk Government passed its new tenancy legislation with some amendments, calling it “striking the right balance between renters and property owners.”

Penny Carr, CEO of Tenants Queensland, the state’s tenant advisory specialists, welcomed the finalisation of the first stage of the reforms, but said they fell short of modernising the laws.

“Our focus will now be to ensure all Queensland renters understand the new laws, how to exercise their rights and meet obligations, without fear of eviction.

“Renters will find it somewhat easier to keep a pet and to have repairs attended to but they will wait until 2024 for minimum standards and will still be subjected to arbitrary evictions.

Bide

Bide 21 Longland Street, Newstead QLD 4006

“These laws are not ones for a modern Queensland as they don’t offer strong enough protections from unfair evictions,” said Ms Carr.

The REIQ says the laws had swung distinctly in favour of tenants.

“Property owners have lost the right to end a periodic tenancy by providing notice,” REIQ CEO Antonia Mercorella said.

“Unless owners can establish limited prescribed grounds (such as the sale of the property) they will never be able to terminate a periodic tenancy.”

The Housing Minister Leanne Enoch has committed to stage 2 of rental reform to begin in the first half of 2022.

 

Article Source: www.urban.com.au

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