The capital city residential property markets have started the year strongly.
Prices across our five capital cities notched up some further gains already this month, in what is traditionally a quiet time for our property markets.
The following chart from CoreLogic shows that all property markets other than Melbourne are higher than they were 12 months ago, and Melbourne has made up most of its lost ground and is likely to reach new heights again shortly.
The following chart shows the cyclical nature of our property markets
Melbourne property prices are up 1.32% over the last quarter and are on track to start 2021 strongly as market activity and confidence continues to return.
At their measured low point in mid-October during the lockdown, prices were down almost 6% on pre-pandemic levels and over 3% year to date then.
Prices also rose in Sydney over 2020, up another 1.22% in the last quarter and Sydney’s median property value has risen 2.9% for the year.
While Melbourne prices have been understandably volatile this year and Sydney saw prices cool off after mid-year, prices in Adelaide and Brisbane have been more resilient, though did exhibit some signs of flattening in the September quarter. Adelaide prices have risen 5.7% this year, Brisbane prices by 4.5%.
After a soft start, the Perth market increasingly found its feet as 2020 progressed, prices up a net 1.4%, all of that coming in the second half of the year.
Buyers are back in droves around the country but…
The number of properties for sale in Australia is beginning to dry up.
Currently property buyers are heading back into our housing markets in droves, keen to get a foothold before property values surge.
But they are finding limited stock, with 7 of our 8 capital cities having significantly less properties for sale than 12 months ago.
Strong demand at a time of limited supply must lead to property price growth.
There are now a range of indicators suggesting our property markets are only going to perform strongly in 2021.
- Consumer confidence has been consistently improving as has business confidence
- Auction clearance rates have been consistently strong in the last quarter of 2020, not just in the two big auction capital of Melbourne and Sydney but around Australia
- More buyers and sellers are in the market and transaction numbers have increased consistently.
- At the same time the banks are keen to write new business – another positive for our housing markets.
- Bank loan deferrals have been consistently falling – there’s little likelihood of an avalanche of forced mortgagee sales creating the fical cliff some commentators were worried about.
- Historically low interest rates and the “guarantee” of rates remaining low for at least 3 years, will give home buyers and investors confidence
- Strong job creation, rising consumer confidence and improving business confidence (leading to spending and employment) will underpin our housing markets.
Clearly, our housing markets were not immune to the Coronavirus economic fallout, but those house price predictions of significant falls did not eventuate and now all credible economists have forecast significant house price growth in 2021 and 2022
To help keep you up-to-date with all that’s happening in property, here is my updated weekly analysis of data and charts as of January 25th provided by Corelogic and realestate.com.au.
What’s happening to property prices?
There has been a palpable change in property market sentiment over the last few months.
But there is a flight to quality.
The shortage of A-grade homes and investment properties compared to the number of buyers out looking for them mean that property values in certain locations are steadily creeping up.
On the other hand B grade (secondary) properties are selling at a discount and no one really wants C grade properties.
The following charts were updated by Corelogic on January 25th, 2021.
Properties listed for sale
At a time when as buyers are returning to the market as confidence rises, the overall number of properties listed for sale is down 13.7% over the last year.
This lack of good properties for sale at a time when many interested buyers have returned to the market is one of the reasons property prices have, in general, held up well.
This confirms what we are finding on the ground Metropole that well-located properties are selling quickly with a queue of buyers waiting for them.
Median property prices
Other than in Darwin, vendor metrics have suggested we’re moving into a seller’s market with the number of days to sell a property decreasing (a sign of the tight supply situation), and vendor discounting ( it’s easier for them to sell) at realistic levels.
The shortage of good properties on the market is seeing properties selling quickly with minimal discounting.
Our Rental Markets
The COVID-19 pandemic has been an unprecedented shock to the rental housing market, reducing demand for rental properties at the same time as supply has increased.
Households most affected by the economic impact are more likely to be renters, and border closures have reduced international arrivals.
The number of vacant rental properties has increased as new dwellings have been completed and some landlords have offered short-term rentals on the long-term market, particularly in inner Sydney and Melbourne.
Government policies have supported renters and landlords.
Rents have declined, partly because of discounts on existing rental agreements and it is likely that rent growth in many areas will remain subdued for some time moving forward.
The absence of new and returning international students and the closing of international borders has dented rental property market, particularly in Sydney and Melbourne.
Auction clearance rates
Auction clearance rates finished the year very strongly in Sydney.
At these levels, when around 80% of properties put to auction sell under the hammer three weeks in a row, price growth tends to follow.
There are now firm signs that we’ve passed the bottom of the Sydney property market.
And Sydney property sales remain strong, even though they’ve tapered off a little in the week leading into Christmas as would be expected.
As life in Melbourne gets back to normal, more properties are being listed for sale and auction clearance rates finished the year strongly despite 864 properties being taken to auction, showing the depth of buyer interest.
Melbourne property sales have continued to be strong, reflecting pent-up demand.
This situation is likely to continue as Melburnians get back to a more normal life and their confidence increases.
The Brisbane property market is performing very strongly with the number of sales being significantly higher than pre the Coronavirus pandemic. Brisbane will start the new year with a surge of pent up demand for home buyers and investors.
Here are the long term auction clearance trends
Now is the time to take action and set yourself for the opportunities that will present themselves as the market moves on in 2021
If you’re wondering what will happen to property in 2021 you are not alone.
You can trust the team at Metropole to provide you with direction, guidance and results.
In challenging times like we are currently experiencing you need an advisor who takes a holistic approach to your wealth creation and that’s what you exactly what you get from the multi award winning team at Metropole.
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Remember the multi award winning team of property investment strategists at Metropole have no properties to sell, so their advice is unbiased.
Whether you are a beginner or a seasoned property investor, we would love to help you formulate an investment strategy or do a review of your existing portfolio, and help you take your property investment to the next level.
Please click here to organise a time for a chat. Or call us on 1300 METROPOLE.
Source of graphs and data: CoreLogic.
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