During the last 12 months, some reputable forecasters have predicted that: “Property prices are going to fall”
“Home values are going to rise.”
“Apartments will be sold on the cheap but houses will be in high demand.”
“Regional areas will outpace capital cities”.
At the height of the coronavirus outbreaks, there was a consensus that there would be a deep and painful fall in home values in Sydney and Melbourne real estate markets.
As it turns out, this expectation could not have been more wrong.
Prices reached record highs in most capital cities at the beginning of this year, data from housing research company CoreLogic shows.
In fact, according to CoreLogic’s March National Home Value Index it is the premium end of the market that is leading the acceleration in the rate of capital gains at present.
Recently ANZ (which also forecast major price falls last year) predicts home prices in Sydney and Melbourne will experience their strongest year since the 1980s and rise 19 per cent and 16 per cent respectively.
By comparison The Sydney Morning Herald/The Age Scope Survey on average predicts Sydney property prices to grow 5.9 per cent in 2021 and 4.5 per cent in 2022, with Melbourne prices to rise 4.5 per cent in 2021 and 5 per cent in 2022.
Commonwealth Bank senior economist Belinda Allen in February forecasted a 9 per cent rise in capital city house prices and a 5 per cent rise for apartments.
The Government injected record amounts of money into the economy through various programs and emergency relief. They included $90 billion JobKeeper program, mortgage deferrals, a significant supplement for those receiving benefits, $25,000 HomeBuilder grants and direct stimulus cheques from the federal government as well as state government programs have all helped keep the country moving.
Very low mortgage interest rate is a major factor in driving dwelling prices higher
The “Expat factor” is also adding to sky-high property sales. Hundreds of thousands of people have returned to Australia over the past year, with many of them coming from expensive cities like London, Hong Kong and New York that have more expensive property markets. They don’t consider Australian real estate prices unaffordable and are happy to pay what is necessary to secure a prestigious property in a desirable location
There are factors suggesting that 2021 may also be a great year for property investors: –
- Consumer confidence has been gradually improving, as has business confidence.
- The Australian economy is improving faster than many expected and likely to grow strongly in 2021-22.
- Jobs vacancies are growing and unemployment is falling.
- Auction clearance rates remain consistently strong, not just in the two big auction capital of Melbourne and Sydney but around Australia.
- While more buyers and sellers are in the market and transaction numbers have increased considerably, the lack of good quality properties for sale has created a seller’s market, where buyers have little choice and are pushing up values of “A grade” homes and investment-grade properties.
- At the same time, the banks are keen to write new business – another positive for our housing markets.
- Bank loan deferrals have been falling – there’s no chance of many mortgagees being forced to sell as many were worried about last year.
- The “guarantee” by the RBA of interest rates remaining low for at least 3 years is giving home buyers and investors confidence to commit to purchasing properties
- Moving forward further jobs creation, consumer confidence and business confidence (leading to spending and employment) will underpin the Australian housing markets.