When the COVID-19 pandemic hit just one year ago, commentators were forecasting that a worst-case scenario could see home values across the country fall by more than 30%. As we all know, that never eventuated. Instead, we saw a strong market rebound in the second half of 2020, which resulted in Australian home values rising 3% over the year according to CoreLogic. Every single capital city except Melbourne saw annual growth. And, for once, the best news story was regional Australia, where housing values rose by 6.9%, outstripping the combined capital city increase of 2%.
Early 2021 has begun with even more positive news for the property market. In March 2021, economists from ANZ upped their house price forecasts to predict a nationwide increase of 17% over 2021. The last time we saw a national property boom as big as this was the late 1980s.
One year ago the auction clearance rate stood at 37.3%, but at the end of March 2021 it was 84.4% across the capital cities. We ended the first quarter with the nation’s busiest auction week since March 2018. The last weekend in March, dubbed “Super Saturday”, saw some auctions in our capitals achieve results that were hundreds of thousands, and sometimes even more than $1 million above their reserves.
CoreLogic’s national home value index reflected this positivity, rising 2.8% in March alone – its fastest growth in 32 years. Overall we saw a rise of 5.8% in national dwelling values over the first quarter of 2021 and a 6.2% increase over the past year to reach a median of $614,768. Houses have continued to outpace units but the market in apartments seems to have turned the corner. Also, for the first time in a year, capital city housing values have outpaced Australia’s regional markets.
So what’s driving the market?
One of the most significant trends we’re seeing right now is that the property market is being fuelled by expat Australians returning home. Research shows around one in five of Australia’s expats – some 400,000 – came back home during 2020. Of these, it seems a large percentage have been intent on buying property. While Sydney – and to some extent Melbourne – absorb many of these buyers, all capital cities and many regional markets are benefitting too, including the Southern Highlands, Central Coast, Wollongong and other locations within striking distance of major metropolitan areas.
COVID-19 has increased the number of people working remotely. So, in addition to the expats, we’re seeing an increase in tree and sea changers who are leaving our cities for more space and a relaxed lifestyle in smaller towns or regional areas. We’re also seeing space become a more important requirement for many buyers, with strong demand for larger homes, garden apartments and any property with a study or sunroom.
The other big factor underpinning today’s national property market is a lack of stock. There are fewer properties available for sale than the long-term average. Combine this with steady demand from buyers who fear missing out, and it is little wonder prices are trending upwards.
With interest rates at record lows, we’ve also seen a rise in first home buyers. Tenants are leaving the rental market because in many cases it is now cheaper to buy than rent. We anticipate this property boom will remain for the balance of the calendar year before prices level out and clearance rates return to a more sustainable 50–60%.
The RBA says it has no plans to raise interest rates. But with Australia’s economy booming, this may change. Having been in real estate for several decades I have experienced the effect of 18% interest rates. So my advice to buyers is to always factor in a rate rise when you’re planning to purchase, just in case.
The boom means that while buyers face strong competition, it’s a great time to sell. Downsizers in particular have seen an opportunity to capitalise, selling larger homes and buying into apartments, as there has been less competition in this market.
Over the past year, The Agency has strengthened its sales and operations teams in regional areas and has taken steps to prepare for a big 2021. We have expanded to Queensland, starting a Brisbane office, to strategically help our clients wanting to buy and sell in the popular Sydney, Melbourne, Brisbane network. We’ve launched a new commercial division. We have also established a China Desk to assist our local clients as much as our international clients, once immigration – one of the property market’s biggest future challenges – resumes once more.
Please download the complete report from the download button, inside you will find:
- Brisbane overview by David Price
- Perth overview by Stuart Cox
- Melbourne overview by Peter Kakos
- Sydney overview by Matt Lahood
- Property management overview by Maria Carlino
- Projects overview by Steven Chen
- Finance overview by John Kolenda
