When the pandemic started to bite in March 2020, most property owners were pessimistic about the future. Pundits for major banks, too, were predicting price falls of around 12%, and saying the market would be bottoming out by June 2021.
We now know that this disaster scenario didn’t occur. At the time of writing, property prices are up across Australia. In regional areas, as city dwellers flocked to areas where homes are more affordable – with more space – prices have skyrocketed.
12 months in review
Looking back over the past twelve months we're pleased to share that home values remain in positive double digits in our two major cities, Sydney (13.3% price increase) and Melbourne (10.2% price increase). The only capitals where values showed declines were Perth and Darwin, but even across these cities, home values had started to recover.
ANZ-Roy Morgan Consumer Confidence remained at 108.9 as of 10 January 2021. This figure represents an increase over the weekly average for 2020 and, surprisingly, is 2.7 points higher than for the same period in 2020, pre pandemic.
As Tim Lawless, CoreLogic director of research notes, record low interest rates have supported housing market activity. This was boosted by a surge in consumer confidence as COVID-related restrictions eased and more people returned to work. In addition, consumers saw the property market ticking along as real estate agents adapted to lockdowns and social distancing.
While home values took a tumble, particularly inner-city apartments, prices across the nation are on the rise again, although apartments are slower to move in the capital cities.
CoreLogic’s data for January shows optimism in the market with home values up 0.9% over the past month. This is an increase on pre-COVID values while the index is tracking higher (at 0.7%) than the peak in 2017.
Brisbane and Hobart fared best, while Darwin defied logic with detached house prices up 27.3% over the 12 months to January 2021, and apartments up by 5.6% over the same period.
Clearance rates recorded a historical low of 30.2% through April 2020. Now that restrictions have been lifted properties the majority of auction campaigns are selling under the hammer again.Encouragingly, clearance rates overall are healthy, with Sydney, Melbourne and Canberra reporting 80%, 82% and 84% clearance rates respectively at the start of 2021. The outlier is Brisbane, with a clearance rate of just 58%.
While spring is often noted as a peak selling season, figures bear out that March is the month with the best sales results. Now borders are (mostly) open for the majority of the time, we expect to see many more property listings and people migrating or moving from now until the end of the year.Supply and demand
Another positive aspect is that properties for sale are becoming scarcer as demand exceeds supply. And while property commentators note that sales activity is down slightly in January 2021 compared with a year earlier, this is not true of all markets.
Rental market conditions are still highly fragmented, with the weakest conditions centered around inner city areas and the apartment market.
In stark contrast, investors in regional markets have seen rental increases of up to 25%. Examples include regional towns such as Noosa, Launceston, Yeppoon, Orange, Kingscliff, Mackay and Yamba, which have all experienced an upward trend over the past few years.
And according to Simon Pressley from Propertyology, in other regional markets, from Bendigo to Ballina, “It’s near impossible to find a rental property”.
With weaker conditions across the apartment sector, investors have continued to see a reduction in rental rates, although Peter Chittenden, a 35-year veteran in the developer arena, believes that the national fundamentals remain strong – lack of supply, strong rental yields, wealthy buyers not as affected as others, and the ‘guarantee’ of low interest rates.
And while off-the-plan apartment sales were hit hard by the pandemic and lockdowns, sales are now booming as investors experience FOMO, fear of missing out.Vacancy rates rose over 2020 in many capital cities, in particular, Sydney and Melbourne were hit hard as international students and tourists were denied entry to Australia. Adelaide CBD is experiencing vacancies but rentals in suburban areas are in high demand and above asking rent rates are being achieved.
Another factor increasing the number of long-term rental properties appearing on the market was the transition of short-term holiday lets to permanent rentals, namely due to lockdown restrictions. In particular, in mid-2020 homes (mostly apartments) listed on AirBnB, Stayz and HomeAway either went on the market for sale or were offered as longer-term rentals. However, after the initial panic, many of these properties are back on the short-term rental market and in high demand as Australians are forced to holiday in our own country, rather than travel overseas.
If you'd like advice about the property market in direct relation to your home, its location, condition and local demand, do not hesitate to get in touch.