We’re a third of the way through the year now and Australian house prices continued to surge strongly in April, albeit at a slower rate than the blistering pace seen in March.
And while auction clearance rates have dropped a little, they’re still at boomtime levels.
But what’s happening to our rental market? We know they’ve been lagging behind house price growth. 
To answer that question we will look at Dr. Andrew Wilson’s latest National Home Rental Market report in today’s Property Insiders chat.
Dr. Wilson will also give you his forecasts for our housing markets for the balance of the year as well as what’s likely to happen to inflation and interest rates.
On the economic front, every level of government and the Reserve Bank have been doing all that they can to support our economy.
With our Federal budget coming out next week there’s lots of speculation about what’s ahead, but no one is really expecting any major announcements that will affect our property markets.
However, the latest finance figures suggest our Budget deficit will be $30Billion smaller than expected, so that should make it easier for Treasurer Josh Frydenberg who has confirmed that he will retain the focus on supporting our economy, getting more people into jobs, and promoting higher wages and will only address our high debt levels later.
This makes sense considering that government borrowing costs and interest repayments are so cheap at present.
Watch this week’s Property Insiders chat as I speak with Dr. Andrew Wilson, chief economist of My Housing Market.
Auction clearance rates
Once again the media, probably looking for something to say, likes to remind us that auction clearance rates are lower than they were at the beginning of the year.
But any other time these types of auction clearance rates would be considered boomtime results.
Dr. Andrew Wilson reported a MayDay auction clearance rate of 84.6% in Sydney last weekend.
Although Saturday’s result was the second consecutive weekend of marginally lower clearance rates for Sydney, it was achieved despite a 39% increase in the number of homes offered for sale.
Dr. Andrew Wilson also reported a month-high weekend clearance rate of 80.1%, a little higher than last weekend (79%) despite 1084 homes being listed for auction on Saturday.
The clearance rate for houses was 79.7%, with units higher at 81.7%
Watch this week’s video is Dr. Wilson unpacks the auction results and explains how we’ve moved from a white-hot property market to a red-hot property market, and he gives his thoughts on what will happen to prices in our major housing markets this year.
He expects there could even be a further 10% growth in Sydney and Melbourne.
Melbourne and Sydney Unit Vacancies Now Falling as Rental Markets Tighten
Home rental markets have continued to tighten over April with clear trends now emerging of a sustained reduction in the record-high vacancies of Sydney and Melbourne inner-suburban and CBD apartments reported over the past year.
Unit rental vacancy rates however continue to track higher than the rates for houses reflecting recent rising demand from tenants for larger, outer-suburban homes.
Tight and falling house vacancy rates were reported in all capitals over April with the exception of Melbourne that recorded the highest result and a rising trend – likely impacted by an ongoing exodus of interstate coronavirus migrants.
Most capitals are now recording vacancy rates at or below 1.0% for houses reflecting emerging chronic housing shortages.
Although vacancy rates for units remain higher than houses generally, the trend continues to decline in all capitals with the exception of Darwin – that nonetheless again reported the lowest capital city rate.
Although unit rents in Melbourne and Sydney have fallen sharply over the past year, vacancy rates have declined markedly over the past month.
This reduction is likely impacted by sharply increased demand for inner-city holiday and business accommodation as interstate border restrictions have eased and short-term rentals have transferred out of the permanent market that it flooded over the past year.
Shortages in rental accommodation have translated into sharp increases in rents over the past year for both houses and units in all capitals with the exception of Melbourne and Sydney.
Canberra remains clearly the most expensive capital for house and unit rents with Brisbane, Adelaide, and Perth all recording strong annual rental increases for both houses and units.
Already undersupplied rental markets are likely to continue to tighten with upward pressure on rents continuing as first home buyer activity is set to ease from current strong levels adding to demand tenancies.
Ongoing chronically low levels of investors will also continue to constrain rental markets on the supply-side exacerbated by the underbuilding of recent years.
The Budget deficit could be $30 Billion smaller than forecast
With the Budget coming up next week Australasia’s labour market’s strong rebound means the federal government now expects the final cost of the JobKeeper scheme to be about $88.8bn.
The October 2020 Budget had forecast that the wage subsidy would cost $101.3bn in total.
Government figures show that more than 90,000 people have come off welfare benefits since JobKeeper ended in late March.
Treasurer Josh Frydenberg says that ending the scheme was the right decision for the economy, the labour market, and the Budget.
Inflation weaker than many expected
What this week’s video as Dr. Andrew Wilson explains how inflation was weak this quarter and the implications this will have for the RBA and interest rates.
You’ll hear Dr. Wilson explain that he believes inflation will rise gently moving forward but interest-rate won’t increase in the foreseeable future.
Credit growth
Personal credit growth was extremely low over the year to March 2021, as consumers took advantage of stimulus payments and record low interest rates to clear debts.
Credit growth across the economy slumped to an extremely low level at just 1 per cent year-on-year. 
Annual credit growth has only been lower than that once since the early 1990s recession, during the financial crisis in November 2009.
But it seems that now Aussie consumers and businesses are once again interested in taking on some debt.
Private sector credit (effectively and standing loans) rose by 0.4% in March, the biggest increase in 13 months but credit was up only 1% year on year over the year – the weakest annual growth rate in 11 years.
Housing led the gains, up a 0.5% and even non-housing personal credit record of the biggest increase in six years, up 0.2%.
Business credit rose 0.3% in the month but was still down to 0.6% during the year.
Now is the time to take action and set yourself for the opportunities that will present themselves as the market moves on
If you’re confused about the mixed messages in the media you are not alone.
However, 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 exactly what you get from the multi-award-winning team at Metropole.
If you’re looking at buying your next home or investment property here’s 4 ways we can help you:
- Strategic property advice. – Allow us to build a Strategic Property Plan for you and your family. Planning is bringing the future into the present so you can do something about it now! This will give you direction, results, and more certainty. Click here to learn more
- Buyer’s agency – As Australia’s most trusted buyers’ agents we’ve been involved in over $3Billion worth of transactions creating wealth for our clients and we can do the same for you. Our on the ground teams in Melbourne, Sydney, and Brisbane bring you years of experience and perspective – that’s something money just can’t buy. We’ll help you find your next home or an investment-grade property. Click here to learn how we can help you.
- Wealth Advisory – We can provide you with strategic tailored financial planning and wealth advice. Click here to learn more about we can help you.
- Property Management – Our stress-free property management services help you maximise your property returns. Click here to find out why our clients enjoy a vacancy rate considerably below the market average, our tenants stay an average of 3 years, and our properties lease 10 days faster than the market average.
Subscribe & don’t miss a single episode of Michael Yardney’s podcast
Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.
Need help listening to Michael Yardney’s podcast from your phone or tablet?
We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.
Prefer to subscribe via email?
Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.
'Forecasts for our property market and inflation | Property Insiders [VIDEO]' have 18 comments
April 25, 2021 Mark
Its interesting to watch the FOMO effect on purchasing real estate at higher prices than they are worth as real estates are elevating prices during the demand. I also recently read an account of a person at auction in Sydney saying I felt like I had won lotto just because he secured the winning bid !
Now the prices are rising so quickly and people are borrowing way to much to purchase at historically low interest rates its not difficult to work out what happens next when interest rates rise again !
See household debt in Australia
https://www.finder.com.au/australias-personal-debt-reported-as-highest-in-the-world
Another concern is the misdemeanor of good debt and bad debt lets face it all debt is bad but it portrays a certain air of its ok because its good debt .. but good debt can turn bad too ie negative equity
We see the occurrence every decade or so the debt delinquency increases this last happened when interest rates were increased
I have been in a position where I have not only seen this occur but almost been burnt too .. not a good feeling but you learn by your mistakes very quickly
The oracle Buffet says be fearful when others are greedy and greedy when others are fearful
I am standing back and waiting for this supposed pandemic mayhem to cease ….
April 25, 2021 Michael Yardney
What you say is correct – some people are making poor decisions driven my FOMO – but that doesn’t mean it’s the wrong time to make a wise investment decision
April 2, 2021 Mary
@Joseph
Your comment about “Australia heading towards Japan” and being over 1T in debt
Have you seen this link lately?
https://www.usdebtclock.org/world-debt-clock.html
Australia is doing AMAZINGLY WELL compared to the rest of the world.
I suggest to try removing the lens of pessimism and looking at life in general with a more realistic and optimistic outlook
People are angry when prices go down
People are angry when prices go up
Can’t seem to win either way eh?
April 2, 2021 Michael Yardney
Well said
March 3, 2021 Jennifer
90% of jobs recovered? I I don t think so. The tourism and travel sectors have been decimated and the education sector is not far behind. It s a shame that 9-5ers forget that these sectors even exist. I personally have been getting by on menial casual jobs for over a year and it looks like that will continue for most of this year as borders remain closed. Some of us have had our lives turned upside down for the foreseeable future, so No, it is not back to normal. I m lucky as I had some money and a mortgage already but I can t even go to the bank to access a better rate through refinancing as I don t tick a single box right now. And I work for a very reputable company normally – stood down definitely through no fault of theirs or mine. Not all of us are back to normal!
March 3, 2021 Michael Yardney
We quoted the Australian Bureau of Statistics latest figures. Of course for the many people like you who are still without a permanent job and the situation is terrible and we are not wanting to belittle that.
February 4, 2021 Raj Thakrar
Hi Michael,
It is too early to be generalist and say property prices will hike. There are number of factors in play here.
1 Due to lock down some sales were on hold
2 Government Incentive in play
3 Relaxed lending rule
4 Government incentive
Cost of new build artificially inflated by builders and developers sending cost of new build to new level making house price higher. The buyers technically are not benefiting for these Government incentives they are going in to builder and developers pocket. Housing in Australia is still young growing market so bubble will burst scenario does to stack up. It is always demand and supply simple economics.
February 4, 2021 Michael Yardney
Raj
The facts show property values are already increasing and have for 4 months. Yes this is driven by pent up demand.
Can they keep increasing? you may benefit from reading this: Property prices cannot keep rising at the same rate
December 10, 2020 Philip Lee
The property market didn’t collapse because the government is throwing everything at it to keep it afloat. Our property market is not a free market driven by market fundamentals. It is manipulated by the government cutting interest rates to zeo, stamp duty concessions plus first home buyer grants, and government guarantees for deposits all sucking in the financially unsophisticated into putting themselves into a life of mortgage stress. It’s just kicking the can down the road.
December 10, 2020 Michael Yardney
Philip. You are correct, our property markets have never been a “free market”, they have been manipulated by the Reserve Bank and APRA. Remember a couple of years ago when investors were dominating the market pushing up prices, the RBA raised interest rates and APRA made it much harder for banks to lend to investors and this slowed down the markets.
Currently intervention has supported our markets and that’s good. It’s the government’s job to protect its constituents – you and me and one way of doing that is providing stability to our housing market. They are too big to fail and no one will let them fail.
October 16, 2020 Joseph Battaglia
Michael your optimistic views irrespective of the true underlying data is disconcerting.
The government is covering up the reality of the situation, throwing money against the wall at all costs (hoping some will stick) and falsely propping up the economy whilst kicking the can down the road. The rhetoric from parties with bias/interest in the real estate market are also contributing to the propaganda that “things are ok and sentiment is up” – whilst reality is different.
We are not leaders on the world stage, for our real property obsession, in fact we are almost ridiculed that we are a nation that increases their wealth through selling properties to each other increasing the price at each transaction.
Its fiscally clear, we should allow the reset button to deflate this overvalued bubble and get back to reality. I mean seriously, some of these prices are ridiculous!
Are we going the way of Japan?
This QE is just irresponsible on all counts.
Over $1T in debt for such a small economy… come on, who are we kidding.
October 16, 2020 Michael Yardney
You are right Joseph, many of our industries are on life support from the government at the moment. And while the property market was being supported by loan deferrals, they seem to be cleaning themselves up nicely. What is the alternative? Do you really want to see businesses go broke and people go hungry? Our government and those around the world have learned how to handle economic downturns. And spending our way out of a downturn is a valid economic argument
October 2, 2020 Dave
Dear Michael. Your articles are interesting
and usually very well written . However this one is full of a lot of spelling and sentence construction mistakes that in parts make it hard
to follow . Take a look at where it says sh-t (Let me know if you need a proof reader ) 😉
October 2, 2020 Michael Yardney
Thanks for the heads up Dave – you are right lots of errors in this one. As I can talk faster than I can type I usually use voice to text, and it is pretty accurate. But clearly I missed a couple of bad bloopers this time.
July 24, 2020 Martin
The RBA will print money. And has printed plenty of it already to fight covid-19. It just doesn’t give the money directly to the government. It prints new money and uses it to buy government bonds on the secondary market so that institutions can take a cut as they buy the newly issued bonds from the government So that the government can pay for jobkeeper and Then these institutions onsell them to the RBA for a markup.
July 25, 2020 Michael Yardney
There has been a lot of discussion recently about Modern Monetary Theory, which suggests central banks should print more money and then give (lend) it to the government, to help pay for it debts.
This week RBA governor Philip Lowe said that he won’t do that (print extra money) instead the banks should borrow on the open market at the prevailing low interest rates because they can afford it.
Rather than print more money he gave the Morrison government the green light to increase debt levels and lock in a larger budget deficit to support the economy during its recovery from the virus crisis
June 26, 2020 Alex P.
While Dr Wilson may say that more sellers entering the market is an expression of confidence, the flip side is that it may be the smart money taking the opportunity to exit while prices are still holding up. If you drill down in the data is there a way to differentiate whether these are investment properties or owner occupied properties being sold and how does that relate to historical data. Second point is that government intervention has done a good job of addressing short term liquidity over the crisis but there have been no measures on a similar scale to address solvency, and solvency is what really matters after the liquidity tap has been turned off.
June 26, 2020 Michael Yardney
Alex, you are right on both counts.
Our experience on the ground speaking to buyers, sellers and estate agents, is that there are very few distressed properties coming on the market at present.
Similarly we do not believe the government is going to pull the rug out from under us in September after he’s gone to such an effort to support the economy and our markets