This year marked a mild property downturn due to the coronavirus-led recession, but looking ahead 2021 is shaping up to be a positive year for property with a sharp recovery on the horizon.
Australia is now out of recession and the property market is bouncing back, particularly in Melbourne after months of lockdown. While the real estate industry is moving cautiously as the country awaits the arrival of a COVID-19 vaccine, there is a positive feeling in the air.
Now that we are (hopefully) through the worst of the pandemic, we can clearly see how the property market has been impacted over the past year. These are the winners and losers of property post-COVID recession.
Australia’s property market has made it through the COVID-recession relatively unscathed – but there are winners and losers. Picture: realestate.com.au/buy
Winners
The health crisis and recession created positive conditions for a number of areas.
Property prices
Despite some initial predictions of 30% price declines, across most of Australia property prices didn’t fall at all during the pandemic. Where they did fall, the declines were very mild. Right now, 80% of capital city suburbs are now recording house price increases, while in Sydney 95% of suburbs are seeing price jumps. For some cities and regions, COVID-19 actually meant even better conditions.
Renters
The recession has hit youth unemployment the hardest, and given that the majority of renters are young, this led to some very challenging conditions early in the pandemic. If you were a renter that remained employed, 2020 marked the year that the pendulum shifted from being landlord-centric to tenant-centric. As employment growth starts up again, conditions are improving for renters and, by extension, for rental growth.
Perth, Canberra, SEQ and Northern NSW
Perth is in the midst of a mining boom and enormous levels of government stimulus are helping Canberra’s property market, while markets in Northern NSW and South-East Queensland are benefiting from a shift in lifestyle for many Australians. The prolonged lockdown in Victoria also seems to be a driver of activity in the property market. In all of these areas, conditions are better now than they were prior to the pandemic.
South East Queensland’s property market has benefitted from more Australians moving north during the pandemic. Picture: Getty
Prestige property
Not many of us have more than $10 million to spend on a home but it seems that enough people do to induce price growth in the prestige property market during COVID-19. This growth was largely driven by the return of high-earning expats, a lack of COVID-19 cases in Australia relative to the rest of the world and strong performance in the mining and tech sectors.
Big homes on big blocks
More people working from home during lockdowns meant that homes on big blocks with more than four bedrooms saw strong demand, which has now translated to price growth. These big homes also didn’t need to be so close to our CBDs with fewer people commuting. As a result, many outer suburban areas did well.
Mining towns
Iron ore prices and exports hit record pricing during the pandemic as China’s recovery began, and our main competitor for these products, Brazil, continued to suffer from high levels of COVID-19 infections. For many mining towns such as Karratha and Port Hedland, this meant strong rental and property price growth. Gold also did well, which helped with strong market conditions in places like Orange in Central NSW.
Positive conditions in WA’s mining sector has led to price growth in some towns. Picture: Getty
First-home buyers
Huge amounts of government incentives, cheap finance and fewer investors in the market made 2020 the year for first-home buyers to strike. Towards the end of the year, many suburbs popular with this buyer group were starting to see drops in available properties to buy and strong price growth was occurring.
Losers
CBDs
Stay-at-home orders and fewer international students, particularly in Melbourne and Sydney, emptied our CBDs during the pandemic. Office, residential and retail properties all saw an increase in vacancies. Australians are now returning to the office but we still have some time before foreign students are able to come back. In 2021, there will be a strong focus from all level of governments on getting people back into the city.
An exodus of city workers and international students in Melbourne’s CBD during COVID led to an increase in residential and commercial vacancies. Picture: Getty
Office markets
There are still some restrictions in Melbourne but in most cities people are free to return to the office. The big question in 2021 is how quickly offices will return to near full capacity and whether office tenants will still need the same space they had before. The impact on vacancy levels will become more apparent as we move further into the new year.
Apartment suburbs close to universities
It wasn’t a great time to own an apartment close to a university in 2020. Vacancies increased, rents dropped and in many places, so did values. If you are a counter-cyclical buyer, you will need to move quickly to take advantage of these conditions. With several vaccines now in production, it is likely that foreign students will be returning to Australian cities in 2021 and with local students also returning to classes, better times are likely ahead.
Property markets near universities should start to rebound in 2021 with the likely return of international students. Picture: Getty
Investors
It has been some time since we saw strong investor activity in the property market. In 2020, problems in many rental markets as well as concerns about the potential for price declines meant that investor activity remained low.
National vacancy rates were stable at 75,947 (2.1 per cent) in November, down from 2.2 per cent (72,879) a year earlier, according to SQM Research’s latest figures.
Sydney’s vacancy rate eased down a little from 3.6 per cent to 3.5 per cent, but Melbourne vacancies remained very high in November at 4.4 per cent.
The vacancies continue to most acute the in CBDs of the two largest capitals due to the absence of tourists and international students, although in Sydney the CBD vacancy rate has dropped from 16.2 per cent to 9.5 per cent since May.
Brisbane’s vacancy rate has continued to decline from 2.5 per cent a year earlier to 1.8 per cent.
All other capital cities have tight vacancy rates of under 1 per cent.
You can click to expand the chart for trend figures:
Sales prior to auction rise as market bounces back in Sydney and Melbourne
The Sydney and Melbourne market bounces back.
This article from Domain.com.au looks at what’s going on.
The number of Melbourne vendors taking an offer on their home prior to auction has soared this year as home owners fatigued by pandemic lockdowns and a stressful year take advantage of the market bounce-back and fast-forward their property sales.
In Melbourne, one quarter of reported sales, or 25.1 per cent, were sold prior to auction last month, compared to 16.6 per cent a year ago, Domain’s auction data for November shows.
It’s a much bigger leap than in Sydney, where pre-auction sales remained at a similar level to 2019. More than one-third – or 33.8 per cent – of reported auction sales in Sydney were actually sold prior, data shows, compared to 32.8 per cent of auction sales in November 2019.
Domain senior research analyst Nicola Powell said the elevated number of properties being sold prior to auction pointed to rising markets in both capital cities.
“Sold priors are an indication of a market on the move,” Dr Powell said.
“Right now it’s showing buyers really want to secure the home prior to an auction to avoid the competition.”
While snapping up a property with a pre-auction offer was the remit of buyers wanting to knock out the competition, for vendors the incentive was about getting a quicker sale so they could move on with their lives after the pandemic, rather than endure the stress of an auction after an already difficult year, she said.
Many thought the Aussie property market would crash during the COVID-19 pandemic – Here’s why it didn’t
The Australian property market didn’t crash during the COVID-19 pandemic – Why?
This article from 9news.com.au looks at what happened.
Record low interest rates, home loan holidays and working from home may have prevented the Australian property market from crashing during the COVID-19 pandemic.
New analysis from property firm CoreLogic has theorised why property values did not tumble during the worst of the pandemic, particularly when the fortunes of small business and employment were so dire.
Just prior to nationwide lockdowns, many were expecting the worst: general consensus was that Aussie property values would drop by anywhere from 10 to 30 per cent.
But the reality was far different.
As a whole, between March and October this year Aussie home values fell just 1.7 per cent. In October they even rose – posting a marginal but technically significant 0.4 per cent increase.
According to CoreLogic’s Head of Research Eliza Owen, the low cost of debt was a major umbrella for the market.
“The cost of borrowing money is probably one of the most important factors influencing property values. Over 2020, the RBA have reduced the official cash rate target (which influences lending rates) by 65 basis points, to 0.1 per cent,” Ms Owen writes.
“In a bid to stimulate economic activity, the reduced cash rate has lowered bank funding costs, leading to record-low mortgage rates.
“This relationship has held up historically, with RBA research previously suggesting that a 100 basis point reduction in the cash rate can lead to an 8 per cent increase in property values over the following two years.”
When unemployment spiked, those who couldn’t afford their mortgage were given a reprieve: all of the major banks offered six-month repayment “holidays” to provide a buffer between job losses and defaults.
“Those that did not want to sell amid economic uncertainty due to an inability to repay their mortgage, did not have to,” writes Ms Owen.
“This may have contributed to very low levels of stock throughout 2020, which only reduced further amid stage 2 restrictions from March. The low level of stock on market likely helped to insulate dwelling values during this time.”
Lastly, it’s theorised that many of the Aussies who were unfortunate enough to lose their job were most likely not invested in the property market at all.
Best Christmas lights Melbourne 2020: Mitcham, Mooroolbark and Cranbourne light up
An article on 7news.com.au showcases the best Christmas lights to enjoy this holiday season around Melbourne.
As a ‘COVID-normal’ Christmas fast approaches, Victorians are starting to emerge from home to shop for loved ones and go to festive events.
But each year, one of the favourite festivities for residents is finding the most impressive streets for Christmas light displays.
While this years celebrations are a bit delayed due to the pandemic and many are yet to put out their lights, the top voted displays have been revealed by Christmas Light Search.
Mooroolbark, Mitcham, Boronia, Strathmore and Cranbourne West are among the suburbs with the best displays.
There is a large display on Aintree Street in Mooroolbark with lasers and inflatables. Credit: Christmas Light SearchThere is a large display on Aintree Street in Mooroolbark with lasers and inflatables. Those who visit on a weekend will also hear Christmas carols.On Fellows Street in Mitcham, there is a huge display with music and inflatables and Calais Circuit in Cranbourne West has also returned with an impressive display with a dancing Santa for another year running.While there are plenty of displays to see in a COVID-safe way, some areas will not take part.
Calais Circuit in Cranbourne West has also returned with an impressive display with a dancing Santa. Credit: Christmas Light Search
The Banyule City Council put out a statement last month, saying the lights in its area were cancelled.“COVID-19 has affected how we work, live and gather,” the statement said. “We have all needed to adapt to various restrictions and altered events, and Boulevard Lights 2020 is no exception.“With thousands attending The Boulevard each year, the event poses a significant health and safety risk not only to our community but to all of Victoria.”
This display is on Angle Road in Deepdene. Credit: Christmas Light SearchVictorian streets with the best Christmas lights
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Love reading your posts, however there is a correction that needs to be made. In the “12 of the Most Unusual and Beautiful Homes in Australia” article, Cliff House is a concept, it doesn’t physically exist at this point in time in Australia. Maybe someone will get inspiration and have the deep pockets to make it a reality. 🙂
Thank you for your teachings and sharing your knowledge in the property/investing world.
'Weekend reads – Must read articles from the last week' have 2 comments
February 15, 2020 Jackline
Hi Michael,
Love reading your posts, however there is a correction that needs to be made. In the “12 of the Most Unusual and Beautiful Homes in Australia” article, Cliff House is a concept, it doesn’t physically exist at this point in time in Australia. Maybe someone will get inspiration and have the deep pockets to make it a reality. 🙂
Thank you for your teachings and sharing your knowledge in the property/investing world.
Kind Regards,
Jackline
February 15, 2020 Michael Yardney
Thanks Jackline – as you know we were just quoting some of the interesting articles we read this week