2020 PROPERTY MARKET IN REVIEW - THREE CLEAR TRENDS
In a year dominated by the COVID-19 pandemic, the overall Australian property market recorded three consecutive months-on-month rises to end the year three per cent higher than the same time last year. Despite the economic downturn and significant periods of lockdown to control COVID-19, the Australian property market significantly outperformed all expectations. In March as the pandemic hit Australia, many media commentators were predicting significant declines in property values, with some analysts predicting values would drop by 20 to 30 per cent. This did not happen, and there are indications that most Australian property markets are poised for significant median price growth in 2021 due to a combination of low interest rates, eased lending criteria, improving consumer confidence and a shortage of supply in many markets.
However, it is worth looking back at three clear trends in Australia’s property markets that became apparent during 2020. These trends were:
- Regional markets outperforming capital city markets
- Extremely low vacancy rates across most markets nationwide
- First home buyers entering the market in larger numbers than at any time in the last ten years
While the overall Australian property market ended the year three per cent higher than the previous year, the regional markets significantly outperformed the capital city markets. Regional markets ended the year 6.9 per cent higher, which was more three times higher than the combined capital city markets, which ended the year two per cent higher. CoreLogic head of research Tim Lawless noted that “regional housing markets had generally outperformed relative to the capital city regions over the past decade, but 2020 saw regional housing values surge as demand outweighed supply”.
Demand increased due to an increasing number of people looking to move from the capital cities – particularly Melbourne and Sydney – to regional areas, attracted by greater affordability, strong residual values, lower commute times, lifestyle advantages, the ability of many professionals to work from home, and increasing employment opportunities offered by many of the larger regional centres. This trend was already evident before COVID-19 hit, but the pandemic has accelerated the migration of people from capital cities to regional areas. Furthermore, an increasing number of professionals are now working from home and unlikely to return to working regularly in CBD offices, and are therefore looking to move to regions that meet their lifestyle requirements.
Just two examples of the strong performance of regional centres can be seen in the performance of the Ballarat and Bendigo markets. The City of Greater Ballarat saw the median price of houses increase by 7.59 per cent to $430,000, while in the City of Greater Bendigo prices increase by 7.76 per cent to $373,125. Other examples of the strong performance of regional centres can be seen in the table below.
For November 2020, SQM Research reported that national vacancy rates were stable at 2.1 per cent. Melbourne had the highest vacancy rate at 4.4 per cent, while Hobart had the lowest vacancy rate of any of the capital cities at just 0.6 per cent. All the capital cities with the exception of Sydney and Melbourne recorded vacancy rates of less than 2 per cent and all recorded lower vacancy rates year on year. However, while vacancy rates are low across most of the capital cities, it is significant that many regional centres have vacancy rates below 1 per cent. Looking at the major Victorian regional centres, Ballarat has a vacancy rate of just 0.7 per cent and Bendigo has an extremely tight vacancy rate of 0.35 per cent. Meanwhile, Port Macquarie (NSW) recorded a vacancy rate of just 0.2 per cent and Albany (WA) recorded a rate of 0.3 per cent. The very low vacancy rates in many regional centres, combined with strong yields, are encouraging investors to look closely at these centres. The table below gives some examples of vacancy rates across regional centres in Australia.
FIRST HOME BUYERS RETURN TO THE MARKET IN DROVES
Data from the Australian Bureau of Statistics show that first home buyers are more prominent in the market than at any time since 2008. In the month of October first home buyers accounted for 35.3 per cent of all owner-occupier loan commitments, which was 3.4 per cent higher year on year. A total of 4 per cent of loan commitments for first home buyers were for investment properties. First home buyers have been encouraged to enter the market in higher numbers in part due to the Federal Government’s Home Builder Grant. While the Home Builder Grant is due to finish, it is likely that incentives by the various State Governments – such as the Victorian Government’s 50 per cent stamp duty discounts – combined with record low interest rates will ensure that first home buyers continue to remain active in the market into 2021.
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PROPERTY PRICES DEFY PANDEMIC, GROWING IN EVERY CAPITAL CITY EXCEPT MELBOURNE IN 2020
Buying a home in every capital city across the country except Melbourne became more expensive in 2020, while regional property prices grew three times as fast as the big smoke.
Despite the ongoing pandemic, Sydney house prices increased 4 per cent over the year to December, CoreLogic data released on Monday morning shows. Regional NSW house prices jumped 8.8 per cent over the same period. Prices in Melbourne slumped 2 per cent, but increased 5.5 per cent in regional Victoria.
Capital city property values collectively increased 2 per cent over the year, while country home prices increased 6.9 per cent.
While prices did suffer during the height of the virus, falling about 2 per cent between April and September, national prices are now in their third consecutive month of price growth.
AUSTRALIAN HOUSING PRICES TIPPED TO BOUNCE BACK IN 2021, EXCEPT INNER-CITY UNITS: ECONOMISTS
Home prices are set to rise in all Australian capital cities in 2021, economists predict, buoyed by low interest rates, an improving economy and government stimulus.
But they warn inner-city apartment prices in Melbourne and Sydney will continue to fall, due to a drop in immigration and international students and increasing numbers of city dwellers relocating to regional areas.
AMP Capital chief economist Shane Oliver predicts home prices will surge by 5 per cent nationally in 2021, but says inner-city unit prices in Melbourne could fall by as much as 5 per cent.
Home values in every capital city rose in December, for the second month in a row since the pandemic took its toll – with national home values up 1 per cent, according to CoreLogic’s Home Value Index.
HOUSE PRICES WITH REGIONAL MARKET OUTPERFORMING CAPITAL CITIES, CORELOGIC DATA SHOWS
House prices in regional Australia have risen at a higher annual rate than in capital cities for the first time in more than 15 years, as COVID-19 increases people’s desire to live outside the big smoke.
Annual data by real estate analysts CoreLogic shows dwelling values in capital cities rose 2 per cent during 2020.
That compares to an almost 7 per cent increase for regional markets.
“Regional markets haven’t outperformed the capital city markets since 2004,” CoreLogic research director Tim Lawless said.
WHY EXPERTS ARE BUZZING WITH EXCITEMENT OVER BRISSIE
Compared to Sydney and Melbourne, Brisbane’s property market has struggled to gain momentum and while some pick-up was finally seen at the beginning of 2020, it quickly dissolved when COVID reached Aussies shores.
But good things are on the horizon for Brissie, Streamline Property’s Melinda Jennison said during a recent Smart Property Investment Show.
“We were seeing some strong price growth in certain pockets around the city,” Ms Jennison said of the marker prior to the pandemic.
However, more recently, that momentum has begun to increase.
THE PROPERTY HOTSPOTS THAT EXPERTS HAVE THEIR EYES ON FOR 2021
Lifestyle locations in our cities and regional areas will see strong buyer demand in 2021, as Australians continue to revaluate their lifestyles after a tumultuous year.
Outer suburbs and regional centres offering a better lifestyle at a more affordable price were front and centre in buyers’ minds this year, as the rise of remote working made the dream of moving further afield a reality.
“We have seen the acceleration of the dream,” said buyers’ agent Rich Harvey, chief executive of Propertybuyer. “[This year] has created the ideal opportunity for people to buy in the city fringe and more heavily populated regional lifestyle areas.
HOW NSW STAMP DUTY REFORMS COULD DELIVER A BOTTOM-END BOOST
The proposed changes to NSW’s stamp duty reform could be a shot in the arm for the state’s low-price property market, an industry expert has said.
During the November state budget, NSW Treasurer Dominic Perrottet revealed that stamp duty taxes could be reformed by mid-2021.
Acknowledging stamp duty as “one of the biggest financial barriers to home ownership”, Mr Perrottet said the current stamp duty system is “centuries old and in need of an overhaul”.
Explaining that residents need a modern tax system.