Australian property prices are set to rise to record highs this year, driven by a heady cocktail of people seeking a post-Covid lifestyle change, ultra-low interest rates and recession-beating government stimulus, a slew of new data shows.
Sydney has already seen the median house price hit a new record high, according to data from Domain, as inner-city residents seize the opportunity presented by increased working from home provisions to seek out their dream lifestyles in outer regions such as the Northern Beaches and the Blue Mountains.
Julia Doyle, an agent at Cunninghams in Manly, said the double-digit rise in values in the past year was being driven by people wanting to relocate to the beach, low interest rates, and very limited stock.
“They say ‘now we’re working from home we can move to the Northern Beaches and not worry about the commute to the city’. We are seeing record sales and new benchmarks for properties every week … so you can sense how keen people are to get in, and not get priced out.”
Other capital cities have also seen a strong recovery, with demand fuelled by first-time buyers taking advantage of 2020’s pandemic-induced dip in values and the government’s stamp duty holiday. One recent report from the consultancy Riskwise estimated Melbourne would join Sydney in seeing an increase in capital growth of between 8-12% in 2021.
The research firm CoreLogic this week said housing values across Australia rose 2.3% in the final quarter of last year, to just 0.1% below the previous record high of October 2017.
The biggest bounce-backs came in areas that saw the biggest Covid-induced declines, such as Kwinana in Perth (up 8.7%), Burnside in Adelaide (up 7.0%), and Brisbane’s Scenic Rim area (up 6.5%).
Pete Wargent, cofounder of the buyersbuyers.com.au, said: “Assuming Australia can keep the virus under control, house prices will be breaking new highs this year. We’ve already seen Sydney getting there and Melbourne won’t be far behind.”
Sydney’s median house price has risen $50,000 beyond the pre-pandemic high, to a record of $1,211,488, thanks to a strong increase of 4.8% in the December quarter alone, according to Domain.
The greatest increases came in outer Sydney areas such as the Northern Beaches, where prices have risen 10.1% in the past 12 months, the Blue Mountains (up 9.1%), while the Central Coast has seen an increase of 12.7%, Domain said.
The market for units has fared less well since March and April, as lockdowns and the closure of borders to overseas workers and students took a heavy toll, but the decline has bottomed out, it said.
In Melbourne, which has suffered the toughest virus lockdowns, owners in inner-city areas could experience negative equity for homes bought before the pandemic, CoreLogic said. Even so, there have been strong increases in prices in areas such as the Mornington Peninsula (up 3.4% since March) and Maribyrnong in the city’s north-west (up 1.8%).
Wargent believes the outlook has moved rapidly from a buyers’ market to a sellers’, with a lot of those buyers entering the market for the first time.
“It’s first-time buyers and upgraders who are pushing the market. Plus, there’s just not very much stock so as soon as something half decent comes up it gets snapped up quickly.”
Despite the continuing tough economic conditions for many Australians, those who retained their jobs or were supported by the government’s jobkeeper scheme were left in a relatively advantageous position. Mortgage holidays also helped but the Reserve Bank said in December that only 3% of housing and business loans were being deferred.
So, from the depths of Australia’s first recession for 30 years, the economy stabilised and borrowers found themselves offered mortgage rates starting with a two rather than a four or five.
“When prices fell 10% or so in some places last year, especially in Melbourne, people who had been saving a deposit for years saw an opportunity. It reached a tipping point for some first-time buyers where it was just cheaper over the year to service a mortgage than rent,” Wargent said.
The increased demand for properties in coastal areas such as northern New South Wales, the Central Coast, and Queensland’s Sunshine Coast was a direct consequence of the pandemic’s often devastating economic and health impact on urban areas.
Mattias Samuelson, director and premier sales agent at Ray White in Helensburgh, south of Sydney, has “never seen anything quite like the current level of inquiries”. One beachfront home in Coalcliff was the most viewed property online in NSW the week before last, according to realestate.com.au.
“Everything we’ve seen in the past 12 months has caused people to re-examine their priorities and look for a better lifestyle,” he said. “It’s a brave new world and I don’t think we’ll ever go back to where we’ve been with the technology we have now for working from home.”
But while most observers are in agreement that the outlook is positive, there are a number of challenges ahead for the market, especially government and regulatory-related issues.
Louis Christopher, founder of SQM Research, has warned the continued closure of Australia’s international border is a spectre over the economic outlook, and that there is a possibility that if the US or European economies don’t pick up in 2021 then Australia could be badly affected.
Another red flag on the horizon is that the Australian Prudential Regulatory Authority, which polices lending by banks, could step in with measures to restrict credit if the housing market gets too frothy, although such intervention are more likely in 2022.
The greatest danger, however, is what happens when the government’s multibillion-dollar jobkeeper allowance scheme is turned off in March, something Christopher believes saved the market from disaster last year by allowing furloughed workers to keep paying their mortgages.
“The ending of jobkeeper payments in March is a factor that we’re watching very closely. We think that measure averted a crash of the housing market in 2020 so it will be interesting to see what happens when it stops in March.
“But if the market makes it through the end of jobkeeper then we’ll see more investment and it will see the market through 2021.”
(The Guardian– Feb 2021)
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