Commonwealth Bank says Australian property prices have held up better than expected and should rebound strongly in the second half of 2021.
CBA said in a research paper last week that prices outside Victoria had avoided the massive falls predicted in March and April, as most governments had lifted restrictions earlier than anticipated.
And it expects this trend to continue.
It predicted a national peak-to-trough fall of 10 per cent in April, but now it predicts a fall of 6 per cent and for prices to hit rock bottom in the first quarter of 2021.
Though not in Melbourne.
There, prices are expected to suffer a peak-to-trough fall of 12 per cent, as a result of the city’s strict second lockdown.
“Unemployment has not yet peaked in Victoria and rising unemployment is a clear headwind for property prices,” said Gareth Aird, head of Australian economics at Commonwealth Bank.
“In addition, the household perception of the national market is consistent with a further softening in prices and the demand impulse from net overseas migration is non-existent.”
The collapse in migration is more acutely felt in Melbourne and Sydney, where CoreLogic data shows prices fell by 4.3 per cent and 2.6 per cent respectively between April and August.
Meanwhile, prices fell by 2.2 per cent in Perth, 0.9 per cent in Brisbane, and 0.7 per cent in Darwin.
And they rose by 0.3 per cent in Adelaide, 1.0 per cent in Hobart, and 1.8 per cent in the ACT.
“In the context of an extraordinary negative economic shock, the fall in national dwelling prices is modest,” Mr Aird said.
Change in national dwelling values in August
But where to now?
In addition to forecasting a national peak-to-trough fall of 6 per cent, CBA’s modelling points to a rapid recovery in the second half of 2021.
Its central scenario is for prices to rise 3 per cent over six months “as the economic recovery gains traction and incredibly low interest rates once again become the dominant influence on dwelling prices”.
“The RBA cuts to the cash rate in 2019 and 2020 that took mortgage rates to record lows are the main reason why dwelling prices nationally have not fallen all that much considering the huge negative shock to the economy,” Mr Aird said.
“The RBA has tended to play down the influence of monetary policy decisions on dwelling prices. But we believe that changes in interest rates are the single most important driver of real property prices over the longer run.”
This is partly because buyers can service higher debts when interest rates are low, enabling them to bid up prices, and partly because rate cuts increase the attractiveness of property relative to term deposits and savings accounts.
But record-low rates will struggle to prop up prices if there’s another wave of infections.
Mr Aird said: “Any imposition of restrictions would likely see prices fall more than our central scenario, which is based on no further lockdowns and a recovery in national economic activity from Q4 2020.”
The research comes as banks start asking customers who deferred home loans in March to resume making payments.
‘Slow burn’ as mortgage holidays end
Data released by the Australian Banking Association reveals that 13 per cent of home owners who took up mortgage holidays had resumed repayments by the end of July, while another 100,000 people resumed repayments in August.
BIS Oxford Economics chief economist Dr Sarah Hunter said the data supported her forecast of a peak-to-trough fall of 10 per cent and showed parts of the economy were already recovering.
Asked whether the price falls would speed up as deferrals came to an end, Dr Hunter said she expected more of a “slow burn”.
“You’d need a situation where lots of owners or investors decided to sell all at once within a very short timeframe to see multiple percentage point declines over the space of a few months,” she told The New Daily.
“That’s not likely.
“It’s likely to be more of a slow burn not too dissimilar to the current pace, as people take time to decide for their own personal position that they need to sell.”
This article is republished from https://thenewdaily.com.au/ under a Creative Commons license. Read the original article.
Brisbane and QLD property market update – December 2020
If there is a defining theme for the Brisbane market over 2020 it has been it’s resilience in the face of a pandemic which has put a halt to interstate and international tourist arrivals for much of the year.
This has not stopped housing values in the city reaching new record highs, with property analysts agreeing that the city, as well as parts of south east Queensland, are on a trajectory of strong growth into 2021. This is against a backdrop of rising values across the major capitals, as the national home value index rose +1.0 per cent in December; the third consecutive month where dwelling values have grown.
Nationally the residential real estate market has proved remarkably resilient, despite a wobble between March and September when COVID protocols interrupted the market – but overall property prices have held steady.
This is largely due to three factors, including the relative success Australia has had controlling the virus, record low interest rates and the government stimulus that has supported businesses and individuals throughout much of the pandemic.
Now let’s take a look at the Brisbane market and how it has performed over December.
Brisbane dwellings continued their steady, determined progress advancing +1.1 per cent over December, for a median price of $521,686. This brings the Queensland capital up +2.1 per cent for the quarter and +3.6 per cent for the year. This places it in the middle of the pack for the major capitals, a position – characterised by a steady and less volatile growth trajectory.
CoreLogic data reports that houses continue to outperform units across the city, advancing +2.1 per cent over December. Property investor and commentator Michael Yardney identifies Queenslanders’ preference for houses over units as the main reasons for this trend.
CoreLogic data reports that houses continue to outperform units across the city, advancing +2.1 per cent over December
If you are looking for suburb specific highlights CoreLogic’s Best of the Best Report 2020 identified Teneriffe (inner city Brisbane) as the Queensland suburb with the highest median house value of $1,859,323.
Michael Yardney points out that, “…in recent months houses in Brisbane have enjoyed improved demand and the number of transactions in the Brisbane housing market are higher than they were pre-Coronavirus.”
He goes on to clarify that property markets within any city are inherently fragmented, and his data shows that, “…freestanding Brisbane houses within 5-7 km of the CBD or in good school catchment zones have grown in value strongly.”
CoreLogic data appears to confirm this, with dwellings in the upper quartile up +1.25 per cent over December. Yardney cautions against investing in certain segments of the Brisbane market which have underperformed, including high-rise apartments, new and off the plan apartments and new housing estates in blue-collar areas.
Like many other regional markets, high demand for property in specific Queensland hotspots like the Sunshine Coast has driven the market up +6.9 per cent over 2020. Contrast this with Brisbane metro’s growth of +3.6 per cent over the same timeframe for some perspective.
Houses dominate sales in most regional markets, and they are posting solid growth here, up +1.5 per cent over December, while units grew a respectable +1.0 per cent over the month.
Sunshine Beach on the Sunshine Coast recorded the highest growth for houses up +27.6 per cent over the year. For units, Noosa Heads has the highest median values at $898,838, while Currumbin on the Gold Coast posted the highest growth over the year advancing +24.0 per cent.
According to property forecasters Hotspotting other regional postcodes showing promise for the 2021, include Mackay, Rockhampton, Gladstone and Townsville – with a recovery in resources behind some of these locations. Toowoomba is also showing promise as new infrastructure projects stimulate the local economy.
Sunshine Beach on the Sunshine Coast recorded the highest growth for houses up +27.6 per cent over the year
Queensland rental market update
Overall Brisbane house rentals have held steady, with a drop in asking rents mainly impacting the inner-city apartment market. According to the SQM, Brisbane’s gross rental yield for houses is currently around 4.0 per cent and for units is around 5.2 per cent.
CoreLogic data indicates that West Gladstone is the Queensland postcode with the biggest change in rents over the year, up +17.4 per cent; while Mackay/Isaac/Whitsundays has the best rental yield of +14.6 per cent.
CoreLogic data indicates that West Gladstone is the Queensland postcode with the biggest change in rents over the year, up +17.4 per cent
The holiday rental market in many regional locations has been impacted by the COVID flight from cities, with rental vacancy rates in some coastal locations close to zero. CoreLogic data shows that the Gold Coast had a vacancy rate of 1.9 per cent in December ‘19, which dropped to 0.2 per cent in December ‘20. It is a similar story on the Sunshine Coast (1.9 per cent vs 0.1 per cent) and Noosa (1.8 per cent vs 0.2 per cent) over the same timeframe.
The outlook for 2021
Overall the medium/long term outlook is positive for Brisbane, with Westpac forecasting that property values could increase +20 per cent in 2022-23.
Realestate.com.au Chief Economist Nerida Conisbee believes that if low interest rates, government incentives for buyers and the Australian economy continues to reopen, ‘prospects for home sellers in 2021 are positive.’
Michael Yardney believes that property markets will perform strongly in 2021 and 2022 based on the removal of overly restrictive lending rules, the job-friendly Federal budget, and the prospect of no interest rate rises for at least 3 years.
CoreLogic’s Tim Lawless sounds a word of caution, warning that any fresh COVID outbreaks, ‘…would set back the economic recovery and have a negative, although temporary impact on housing markets.’
Article Source: www.openagent.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
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