What’s ahead for our property markets for the rest of 2020 and into next year?
That’s a common question people are asking now that our real estate markets have been hit by the triple threat of:
- The Coronavirus Pandemic
- A recession
- Social and political unrest around the world
And with a second wave of Coronavirus now upon us, particularly in Melbourne, many are wondering if those dire predictions of 20-30% falls for our property markets that were made earlier in the year by those property pessimists are now going to come true.
The simple answer is NO – our property markets are not going to crash – in fact they’ve remained remarkably resilient.
Sure there are problems in some of our rental markets and certain sectors of our real estate markets are suffering, but having invested in property for almost 50 years I’ve found that whenever there has been an economic threat, recession, interest rate spike, or credit squeeze, the residential markets always bounce back, usually more quickly than projected, demonstrating the resolve of the Australian community to maintain its embrace of real estate and homeownership.
Perspective is key through the COVID-19 crisis, and even though Victoria has been battling to contain a second wave of the virus, it seems to be winning the fight and we can’t lose sight of the fact that Australia still has some of the lowest rates of death and infection in the world.
Our economy is also proving more resilient than those of our peers, and, barring a significant deterioration, should return to growth in the December quarter of 2020.
While there are still many challenges ahead for our economy and our property markets, there are also reasons to be optimistic about certain segments of the Australian property market, particularly in the long term, and that’s what I’ll be discussing in this article.
- WHAT’S AHEAD?
- PROPERTY PRICE FORECASTS
- SYDNEY PROPERTY MARKET FORECAST
- MELBOURNE PROPERTY MARKET FORECAST
- BRISBANE PROPERTY MARKET FORECAST
- CANBERRA PROPERTY MARKET FORECAST
- PERTH PROPERTY MARKET FORECAST
- HOBART PROPERTY MARKET FORECAST
- ADELAIDE PROPERTY MARKET FORECAST
- WHAT CAN YOU DO TO STAY AHEAD IN THE CURRENT MARKET?
It wasn’t that long ago that the media was forecasting a property bust and that Australia’s housing markets could fall up to 30%.
This was predicated on the worst case scenario of a long drawn out COVID-19 pandemic and a deep world wide recession, but Australia’s property markets look like they’ll be in for a soft landing.
The worst case scenarios of Covid-19 racing through our national and killing hundreds of thousands of people just hasn’t occurred, but our response to the pandemic has pummelled our economy.
Yet despite our economy being in poor shape, housing price falls are likely be modest, and much smaller than predicted at the height of the COVID-19-related shutdowns earlier this year.
In fact, so far the property markets have remained resilient to a material correction.
And, other than Victoria, with restrictive policies being progressively lifted or relaxed, the downwards trajectory of housing values will be milder than many first expected.
Of course there are two substantial downside risks to the property market.
- A significant second wave of Coronavirus infections would slow our economic recovery, but other than in Victoria, we seem to have the infection under control. And even Melbourne now seems to have its second wave under control
- There is a lot of concern that at the end of the current deferral schemes and government support packages Australia is going to fall off of a “Financial Cliff.”
Clearly the significant financial stimulus and support measures provided by our governments have kept the doors of many local business open and many people in their jobs.
At the same time rental relief packages have kept tenants in their homes and mortgage support has meant that there have been very few forced sales.
So yes, our economy is on life support, but remember…the government and the Reserve Bank have clearly stated that they will do anything and everything they can to support our economy and minimise the impact of the coronavirus on businesses and our economy.
I can’t see the government which has spent so much time, money, effort and publicity building a “bridge” to get us across to the other side, to allow us to fall off a cliff rather than to extend that bridge even further.
At the same time Australian Prudential Regulation Authority (APRA) and the banking industry have extended the current mortgage deferral schemes – they’re not keen to see mortgage holders go into default.
Fact is, the economic downturn and the impact on the property market due to the pandemic is likely to be a little more severe than forecast only a month or two ago on account of the renewed lockdown in Melbourne.
2021 is likely to be a year of economic recovery after a challenging end to 2020.
However let’s start with the current situation:-
The underlying trend in property prices has continued to soften in the wake of the pandemic, but there are some positive trends emerging.
Since Australia’s international borders were closed on 22 March;
- Sydney prices have eased 1.9%,
- Melbourne have softened by 4.4%,
- Perth property values eased by 2.2%,
- Brisbane home values are broadly steady (-0.3%),
- Adelaide prices have risen 0.6%.
However, median property values are higher than they were 12 months ago in all our capital cities other than Perth, with Sydney +10.7% and Melbourne +6.8% over the last year.
Source:Corelogic 14th September 2020
Source:Corelogic 14th September 2020
What’s ahead for our economy?
We all know Australia is going into recession, but how bad will it be and how long will it last?
And unfortunately unemployment is rising and the government has now taken on so much debt that its deficit is the highest since World War 2, but Diana Mousina, economist at AMP Capital recently explained how Australia’s economic prospects are looking:
Local workers have been spared the worst of the fallout, with Australia’s unemployment rate of around 7.5% comparing well with the situation in the US, where more than 11% of the labour market are looking for work.
Locally, unemployment is still at its worst level since the Great Depression, but the situation would certainly be more dire were it not for the impact of the JobSeeker and JobKeeper programs.
The success of Australia’s stimulus package can be attributed to the way in which it was primarily funnelled through to direct payments for businesses and households.
Here, stimulus payments have landed quickly and directly in bank accounts and that money has been more effective in supporting businesses and shoring up consumer demand through the pandemic.
The extension of both programs by the Federal Government, announced well ahead of their September expiry dates, is a welcome move and we’re confident that a further extension will be granted if and where necessary before the new deadline in March.
The trade-off to the budget’s bottom line, deficits in the order of $85.8 billion for FY2020 and $184.5 billion in FY20211, will be eye-watering but not insurmountable, if history is anything to go by.
Previous deficits of this magnitude were used to finance the country’s war efforts in 1914-18 and 1939-45, and there are strong parallels, at least from a fiscal perspective, with the current crisis.
Those deficits were effectively erased by rising post-war inflation, and when we eventually do climb out of our current low-rate environment it should become clear that the magnitude of the task in front of us will diminish significantly.
Australia’s debt burden by international standards remains low, with our net public debt of 40% of GDP paling in comparison to countries like the US (more than 100%) and Japan (more than 160%).
There is an emotive argument to be made that younger generations will bear the brunt of repayments, but it is worth remembering that it is precisely these workers who are worst affected by the downturn, and for most the prospect of keeping their jobs will be worth the cost.
However, the OECD expects Australia’s economy to perform better than most other countries in the year ahead.
But we shouldn’t kid ourselves, even with the better than expected recovery, economic conditions will remain subdued, and unemployment as well as underemployment will likely remain elevated for a number of years.
What about Melbourne’s Stage 4 Lockdown?
It’s generally accepted that Australia recorded two successive quarters of negative growth in the March and June quarters, even though the latest National Accounts numbers won’t be unveiled until September to confirm it.
But now, many economists aren’t sure the recession will end at June.
The blow to Victoria, which accounts for nearly a quarter of Australia’s GDP, could be between 10 and 15 per cent in the three months to September.
Melbourne-based NAB chief economist Alan Oster has been in the profession for more than 40 years and he’s seen a fair few economic crises in his time, but nothing compares to this.
“In terms of sharpness in the decline in activity, this makes the recessions in the 80s and 90s look like child’s play,” Mr Oster says.
“Unemployment did get to 11 per cent in the 1990s recession, but it took two years to get there.”
“I would expect conditions, or certainly confidence, to go deeply south compared to where it was,” he says.
Craig James, Chief Economist at CommSec produced an excellent report giving there interpretation of the the RBA’s August Statement of Monetary Policy together with Ryan Felsan, a Senior economist.
Here’s part of what the report explained:
Economic forecasting is always fraught with difficulties and that is even more the case in the current environment.
The key factor is how well states, territories and countries manage to suppress the virus.
To date, Australia has been travelling well on this path.
Then came the second wave in Victoria unexpectedly arrived and economic forecasts had to be downgraded.
Fiscal and monetary policy have been working in unison to support businesses and economies.
The risk is that support measures may need to be left in place longer and/or that new measures need to be applied.
Around $330 billion (16.2 per cent of GDP) has been outlaid by federal, state and territory governments to support the economy.
The Reserve Bank is now expecting a lower-case ‘v-shaped’ economic recovery.
The CommSec report explained that our economic recovery is expected to be more protracted.
Rather than rebounding at a 7 per cent annual pace in the year to June next year, the lift is expected to be more like 4 per cent.
Unemployment is still tipped to top out near 10 per cent – but later this year, rather than earlier.
Unemployment may still be around 8.5 per cent by the end of 2021, rather than 7.5 per cent.
Interestingly the RBA indicated that the Board considered whether other measures should be considered to support the economy – notably intervening in foreign exchange markets to drive the Aussie dollar lower, and moving to negative interest rates.
Both were rejected.
Bottom-line is that the RBA Board believes that current monetary policy measures are sufficient.
But inflation will be lower for longer and unemployment will be higher for longer.
So interest rates will remain at current levels through to 2022.
The Commsec report concluded…
Clearly the economic future is more uncertain than usual.
But, notwithstanding issues in Victoria, Australia generally is in good shape compared with other countries.
There is scope for more fiscal stimulus without the debt burden getting anywhere near the levels in the US, UK, Japan and China.
The Reserve Bank believes there is still a role for monetary policy to provide more support if needed.
But options seem to be limited.
That said, in recent days the Bank has returned to the bond market, purchasing short-dated government bonds as part of its Yield Curve Control strategy.
Should it need to, the Reserve Bank could purchase longer-dated maturities or state government (semi-government) – especially Treasury Corporation of Victorian (TCV) – bonds to keep borrowing costs low as governments issue more debt to fund stimulus spending.
But overall, households and businesses aren’t keen to take on debt at any interest rate.
Apart from ‘helicopter’ money drops, reliance will be firmly focussed on fiscal stimulus.
Consumer Confidence is falling
ANZ-Roy Morgan Consumer Confidence rose 4.1pts to 92.7 over the last week and is at its highest since late June.
However, Consumer Confidence is 21.4pts lower than a year ago (114.1) and 1.2pts below the 2020 weekly average of 93.9.
Now 25% (up 1ppt) of Australians say their families are ‘better off’ financially than this time last year, while 34% (down 1ppt) say their families are ‘worse off’ financially.
In addition, 36% (up 2ppts) of Australians expect their family to be ‘better off’ financially this time next year (the highest figure for this indicator since mid-June), and 18% (down 1ppt) expect to be ‘worse off’ financially.
Some 7% (up 1ppt) expect ‘good times’ for the Australian economy over the next 12 months while 46% (down 5ppts) expect ‘bad times’.
Meanwhile, 33% (up 4ppts) of Australians say now is a ‘good time to buy’ major household items, while 37% (down 2ppts), say now is a ‘bad time to buy’.
What about house prices?
What will happen to our property markets will depend upon how soon our economy picks up, the level of unemployment reached and importantly the level of consumer confidence coming out of our recession.
At the same time, with banks extending borrowers a lifeline in the form of deferred mortgage payments, there is no forced selling at present and this plus the lack of new properties being listed for sale is underpinning property values.
Fortunately, our Federal government has learned a lot about handling monetary and fiscal policy during economic downturns resulting in the slashing of interest rates, the introduction of Quantitative Easing and our spending $300Billion plus to build a bridge to get us through this and will now doubt spend a lot more to kickstart the economy.
And of course the State governments have introduced their own support and stimulus packages.
Clearly our housing markets won’t be immune to the Coronavirus economic fallout, but the impact on property values will depend on how long it will take to contain the virus.
Transaction levels are likely to be significantly impacted over the next few months while many buyers and sellers work their way through the uncertainty, but sellers are returning to the market and in general vendors are selling for lifestyle reasons, rather than for financial reasons.
In other words they’re not panicking about the state of the market but choosing to move into a bigger or a smaller home, or move to a school catchment area, or they want a bigger backyard rather live in a small space recognising that life is going to be different moving forward.
Some want room for a home gym or a Zoom Room.
At the same time after the first lockdowns, buyer confidence has rebounded but they are being more selective.
They’re not in a hurry and there is clearly a flight to quality, especially since there are now more properties being put to sale by auction than there were a few weeks ago.
Well located A Grade homes and investment grade properties are attracting strong competition, but buyers since being very selective (and so they should be.)
Dr Andrew Wilson has made the following forecasts for our property markets:
Of course at times like this, median house values or even forecast figures are of little value.
One needs to get more granular to understand what is really going on.
Each state is divided into multiple markets, by geography, price point and type of accommodation.
Each of our capital cities has an inner and near CBD property market, a inner suburban market, a group of middle ring suburbs and outer suburban property markets.
And then there are apartments – either high-rise or medium density, townhouses, villa units and houses. There are also new and establish property markets.
And each of these market segments behaves differently.
Currently most of the sales occurring are in the lowest price points with few discretionary sellers in the more established suburbs and higher bracket suburbs.
This means that the palette of properties currently being sold is generally in the lower price bracket and this alone will bring down reported median home values.
And this doesn’t accurately reflect the value of particular properties in any specific market, but more of the types of properties being sold.
More recently buyer search activity fell nationally, however, a closer look at the data shows the national figure has been significantly pulled down by a large fall in Victoria (-13.3%).
Most other states recorded more modest falls; New South Wales (-1.5%), South Australia (-1.3%), Western Australia (-0.1%) and Tasmania (-1.7%).
Nationally, buyer search volumes have now declined by -4.9 per cent from their peak.
In Victoria search volumes are -18.6 per cent below their peak.
Despite the recent decline in search volumes nationally, it’s important to note volumes are still 28.8 per cent higher than they were a year ago.
Even in Victoria, search volumes remain 9.4 per cent higher than last year.
And while lockdowns are likely to impact on search behaviour for a few weeks (based on the data from the first lockdown period) REA expect that search behaviour will start to rebound as cases come under control and individuals start to see an end to the lockdown period.
The largest year-on-year increases in for sale search volumes have been recorded in Australian Capital Territory (98.5%) and Northern Territory (40.6%).
Melbourne’s second round of COVID-19 restrictions are having more of an impact on the property market than the first, with search activity dropping significantly in Victoria last week.
The -13.3 per cent fall in for sale search volumes in Victoria as the state went back into lockdown marked the largest weekly decline this year.
This highlights that, at least initially, the re-implementation of lockdowns in Victoria is having a bigger impact on search behaviour than the first round did.
The most likely scenario by end of 2020 is modest price falls
The most likely outlook for property is for prices to fall modestly in some areas and be broadly steady in others, combined with a slow increase in transactions from weak levels.
Source: ANZ Bank
I think the forecasts shown in the above chart by the ANZ Bank are realistic.
However the problem with making these type of forecast is lumping all properties together.
There is not one Australian property market.
In fact, there’s not one Sydney or Melbourne property market either.
There are markets within markets dependent upon price point, type of property and geographic location.
So which part of Australia’s property market is predicted to fall in value by 10%?
Is it all properties? That’s unlikely.
Is it median house prices? Or will certain types of property fall in value much more than the other than others?
Not all property market will be affected equally,
And while I don’t disagree that “overall” our property market could easily fall 10% in the short term:
- “Investment grade” properties and A grade (above average) homes could fall in value by around -5%
- B grade (average) homes could fall in value by up -10-15%,
- C grade (less than perfect) will be the hardest hit as there will be a flight to quality.
But this will be on a on very low levels of transactions and the pace of recovery from that point will depend on the state of the wider economy.
The key factor supporting prices so far is that few people have been forced to sell their homes due to losing their jobs or having their incomes cut.
This has been enabled by the government’s financial support packages assisting households whose income has fallen, in combination with banks allowing people in financial difficulties to defer mortgage repayments.
The worst affected residential markets will be:
- Apartments in high-rise towers – in fact this is these properties are likely to be out of favour for quite some time.
- Off the plan apartments and poor quality investments stock (as opposed to investment-grade) apartments, particularly those close to universities.
- Established homes in the outer suburban new housing estates, where young families are likely to have overextended themselves financially and with many people will be out of work for a while. Currently many first home buyers are taking advantage of the various incentive packages including HomeBuilder to buy newly constructed homes, leaving established houses in these locations languishing.
- Properties in the blue-collar areas.
But this will be on a on very low levels of transactions and he pace of recovery from that point will depend on the state of the wider economy.
On the upside, households and property investors whose incomes remain stable and secure will be able to take advantage of historically low interest rates.
This should support a return to stronger levels of price growth in the medium term.
The following chart shows how Australian residential property has historically fared well against negative economic shocks
In fact, as an asset class, bricks and mortar has performed exceptionally well during previous economic shocks.
What the above and the following charts show is that negative economic shocks do not necessarily lead to severe declines in property prices.
Property does not show the same volatility of shares during a downturn nor the same decline in values because it is used to living and therefore not a speculated upon the shares.
Additionally it cannot be bought or sold as quickly as shares meaning price movements are not as volatile.
This time round, with the banks giving mortgage deferments or holidays, it is unlikely that we will have a large number of forced or mortgagee sales that could undermine market confidence.
Source: ABS and Metropole Research by Kate Forbes
Some areas will suffer more
As I said, moving forward some suburbs are likely to only experience minimal falls in value while others will suffer more significantly.
Just think about the typical demographic who bought in the new housing estates in the outer suburbs of our capital cities.
Residents there are typically at the same stage of their life cycle, getting their foot on the property ladder, setting up their families, paying a large mortgage and carrying significant credit card debt.
These are the types of locations where residents are more likely to suffer mortgage stress, and if people need to sell up, at a time when their neighbours are in the same boat, property values could drop significantly.
The same is true for the many investors who have bought cookie cutter apartments in and around our CBDs and who now have minimal or even negative equity in their properties.
With few new investors buying this type of property, CBD apartments are likely to fall in value significantly.
On the other hand, the demographics of our established middle ring capital city suburbs are very different as they are populated by a range of families at different stages in their lifestyle.
Some residents would have bought their property 30 to 40 years ago and paid off their mortgage a long time ago.
Others may have purchased the property 15 years ago and paid off a significant portion of the debt while living in the same street there would a few newer residents who have significant level of debt against their homes.
In these suburbs demand currently demand is higher than the undersupply of properties available and values in the suburbs are likely to hold up well.
The following chart suggests that Hobart will be more affected than other capital cities by the strict social distancing measures imposed to prevent spread of COVID-19.
At the other extreme in the ACT, where employment is more concentrated amongst public Inspiration, employment and incomes not as broadly affected.
Not surprisingly people working in the accommodation, food services and recreation industries have been hardest-hit in losing jobs over the last few months – see chart below.
If you think about it, many of these people will be younger and living in rental accommodation rather than being home owners.
This suggests our rental markets will be harder hit than our housing markets, and that’s actually how things are playing out .
Supply and demand
For the last few decades, continued strong population growth has been a key driver supporting our property markets.
Australia’s population was growing by around 360,000 people per annum, meaning we needed to build around 170 to 180,000 new dwellings each year to accommodate all the new households.
Since 60% of our growth is dependent on immigration, in the short-term population growth will fall, but they should increase again as soon as overseas immigrants will be allowed to come to our shores.
In the meantime, the oversupply of dwellings in many Australian locations is now dwindling and there are very few new large projects on the drawing board.
Considering how long it takes to build new estates or large apartment complexes, we’re going to experience an undersupply of well-located properties in our capital cities in the next year or two.
In the next few months supply will be constrained because of very few vendors are putting their properties on the market.
Think about it… unless you really had to sell you wouldn’t place your property on the market today would you?
The lack of good stock at a time when there is still reasonable demand by purchasers looking to take advantage of the opportunities the market presents means it is unlikely house prices will fall dramatically.
What about affordability?
With interest rates at historic lows, housing affordability is as cheap as it ever has been.
I’m not saying the properties are cheap – they never have been if you want to live in great locations in major world class cities.
But for those first home buyers wanting to get a foot on the property ladder, or established home buyers wanting to upgrade, or investors looking to hold onto a property, the holding costs are less than they ever have been.
And the RBA has declared that interest rate will not increase until unemployment is back to within their preferred range of around 4.5%.
They have said this will be unlikely to occur in the next three years.
House price forecasts
In the medium term, property values will be linked to the extent that quarantine measures affect income, employment, borrowing capacity and credit availability.
Some sectors of our economy and housing markets will be affected more than others.
The largest and most direct industry shocks from the coronavirus are expected in:-
- Tourism, local restrictions will ease up before and overseas travel restrictions may take some time to lift;
- Hospitality, where social distancing leads to a decline in café, bar and restaurant patronage;
- Education, due to fewer foreign students being able to travel;
- Retail, which will be dragged down by low consumer confidence levels; and,
- Recreation, theatres, cinemas and art galleries have closed down.
However, I’m comfortable with the underlying long term fundamentals supporting our property markets int he medium to long term. Let’s look at a couple of them…
- Population growth
As I said, in the short-term population growth will fall, but this should increase again as soon as overseas immigrants will be allowed to come to our shores.
Australia is likely to be seen as one of the safe haven’s in the world moving forward.
- Declining housing supply
The oversupply of dwellings in many Australian locations is now dwindling and there are very few new large projects on the drawing board.
Considering how long it takes to build new estates or large apartment complexes, we’re going to experience an undersupply of well-located properties in our capital cities in the next year or two.
- Interest rates are low and will go down further
The prevailing low interest rate environment is making it easier to own a home, either as an owner occupier or investor.
In fact, it’s never been cheaper for investors to own a property with the “net outlay” – the out-of-pocket expenses – being the lowest they’ve been for decades considering how cheap finance is today.
- Smaller households are becoming the norm
Sure many people live in multigenerational household, but pretty soon Millennials will make up one third of the property market and their households tend, in general, to be smaller as are the households of the booming 65+ year old demographic.
More one and two people households means that, moving forward, we will need more dwellings for the same number of people.
- More renters
Soon 40% of our population will be renters, partly because of affordability issues but also because of lifestyle choices.
The government isn’t providing accommodation for these people. That’s up to you and me as property investors.
- First home buyers are back
First home buyers are back with a vengeance, in part thanks to the government’s new scheme to encourage them, but also because of cheap finance and rising property values.
As opposed to established homebuyer who have a “trade in” that is increasing in value, if first home buyers wait to get into the market they’re finding the market moving faster than they can save, so they’re hopping on board the property train as quickly as they can.
- The underlying fundamentals are strong
Sure our economy is taking a hit and the share market is volatile, but our property markets are underpinned by the fact that 70% of property owners are home owners who are there for the long term.
They’re not going to sell up their homes – they’d rather eat dog food than give up their homes.
And the Australia’s banking system is strong, stable and sound.
Even though a few home buyers have overcommitted themselves financially, there should be no real concern about household debt because, in general, it is in the hands of those who can afford it.
There is currently a very low rate of mortgage default of mortgage to increase.
As the community starts to become more concerned about the economic impact of the corona virus, it is likely that there will be a flight to quality assets, and bricks and mortar have always stood the test of time.
In other words, the share market volatility will make some investors look to real estate as an alternative secure investment vehicle underpinned by 7 million homeowners in Australia.
In fact, it the only investment market not dominated by investors.
Prior to COVID-19 the Sydney property market was on the move having recorded its quickest turnaround in decades.
While Sydney home values slid a little over the last few months issues are appearing with strong by demand and I auction clearance rates suggesting that through the falls in property values unlike the full well located homes.
While home values are remaining resilient, rents have declined and vacancy rates for inner city and near city apartments have increased.
From a more positive perspective, property sales activity is up by around 40% from the April low and auction clearance rates are remaining in the high 60% range
This implies an improvement in buyer demand and a better fit between buyer and seller pricing expectations.
While A grade homes and investment grade properties are likely to fall a little (- 5- 10%) moving forward, this is a great time for cashed-up investors and homebuyers planning to upgrade to buy a property considerably cheaper than they would have had to pay a few months ago, and for considerably less than they will have to pay this time next year.
B grade (secondary) dwellings may fall in value by 10-15% and C grade properties are likely not to sell at all.
Sure there are fewer good properties for sale at the moment, and almost all the good ones are for sale off market, however if you’d like to know a bit more about how to find these investment gems give the Metropole Sydney team a call on 1300 METROPOLE or click here and leave your details.
Before Coronavirus hit our markets, Melbourne property prices were surging with dwelling values up 12% higher to reach new highs.
However, Melbourne housing values have been slowing slipping over the last few months, but they’re definitely not crashing like those doomsayers were predicting.
Like in Sydney, A grade homes and investment grade properties in Melbourne are likely to fall a little (5- 10%) moving forward.
B grade (secondary) dwellings may fall in value by 10-15% and C grade properties are likely not to sell at all.
At Metropole we’re finding that strategic investors with a long-term view and homebuyers looking to upgrade are still in the market, picking the eyes out of the off market properties.
It’s likely that they see the long-term fundamentals, as Melbourne rates are one of the 10 fastest-growing large cities in the developed world,.
Melbourne’s population was forecast to increase by around 10% in the next 4 years.
Clearly this will slow down now, with restricted borders protecting Australia, but once we “cross the bridge” Melbourne will remain one of the most liveable cities in the world.
If you’d like to know a bit more about how to find investment grade properties in Melbourne please in the balance of this year give the Metropole Melbourne team a call on 1300 METROPOLE or click here and leave your details.
Understandably, the coronavirus crisis is creating uncertainty for those interested in the Brisbane property market, however while Brisbane home values have lost their upwards momentum through 2020, but they’ve held reasonably firm through the past few months.
Looking back over the last few years Brisbane’s property downturn in 2018-9 was quite shallow compared to the big two capital cities and following its recent upturn property values growth has slowed.
Brisbane’s housing market has been holding up better than the largest cities with home values recording less downwards pressure.
Brisbane property prices are still about 55% of Sydney’s while household incomes are only around 12% lower, underpinning the value of Brisbane real estate.
Brisbane rents have also recorded a mild downturn falling by 0.6% over the June quarter.
However, local rental yields remain well above the combined capital city average tracking at a gross 4.2% for houses and 5.2% for units.
Sales activity has shown a sharp rise over the past two months up by an estimated 74% since activity plunged in April.
In a positive sign of buyer confidence with an easing or removal of some of the COVID related restrictions, sales activity jumped by 22% in May.
But what’s going to happen to the Brisbane housing market moving forward?
With less reliance to overseas migration as a source of housing demand and the largest number of interstate migrants, the Queensland market may be less exposed to downwards pressure in housing values.
Of course Queensland is highly exposed to the Chinese economy, in particular tourism, education and foreign property purchases.
On the flipside, once travel bans are lifted, the Queensland economy and property market should benefit from more local travel by Australians as it is likely that overseas travel will still be restricted.
Not all Brisbane property will be impacted equally.
Clearly there is not one Queensland property market.
Regional Queensland is likely to suffer more while the Brisbane real estate market is underpinned by multiple pillars, and therefore likely to suffer less than areas like the Gold Coast and Sunshine Coast or regional Queensland.
But even Brisbane does not have ‘one’ property market.
Based on the predicted pace of the post-recession recovery, I would expect the pandemic to have a more limited and shorter-lived impact on house prices than either the early-1990s recession or the Global Financial Crisis.
Just to make things clear…I have confidence in the long term future of the Sunshine State capital.
Brisbane is one of the world’s great cities.
Liveability, affordability, scale and future economic prospects all suggest that Brisbane is a market where you can confidently buy.
While it’s true that once we come through the Coronavirus pandemic Brisbane is likely to be the one of the best performing property market over the next few years, there is not one Brisbane property market.
While some locations in Brisbane have strong growth potential, and the right properties in these locations will make great long term investments, certain submarkets should be avoided like the plague.
In the long term, Brisbane’s economy is being underpinned by major projects like Queen’s Wharf, HS Wharf, TradeCoast, Cross River Rail, the second airport runway and the Adani Coal Mine, but jobs growth from these won’t really kick-off for a few more years.
There is minimal further downside for the Brisbane housing market and now is an excellent time to ride the next property wave in Brisbane
Our Metropole Brisbane team has noticed a significant increase in local consumer confidence with many more homebuyers and investors showing interest in a property.
At the same time we are getting more enquiries from interstate investors there we have for many, many years.
Canberra Property Market
Canberra’s property market has been a “quiet achiever” with dwelling values having reached a new peak after growing 6.3% over the last year .
Considering a large percentage of Canberra population is employed by the government or industries supporting the public sector, Canberra’s property market is less likely to be affected by the upcoming recession than our other capital cities.
Perth Property Market Forecast
Perth’s long awaited recovery has been interrupted by COVID-19 with values falling over both May, June and July to be down 2.2% over the quarter.
Prior to COVID, Perth home values had avoided the fall for six months straight.
Although home values have dropped housing activity has shown a sharp rise over the past few months, with our estimate of sales more than doubling from the low base set in April.
Rents have continued to rise through the June quarter as well up almost 1% to be one of the few capital cities where rents are continuing to rise.
Hobart Property Market Forecast
Hobart was the darling of speculative property investors and the best performing property market in 2017- 8, and while dwelling values reached a record high in February 2020, its boom is now over and values fell slightly over the last few months.
It’s likely the Hobart market will continue to lose its momentum over the year as its local economy is very dependant on tourism which is a sector of the economy that will suffer more than most.
Adelaide Property Market Forecast
Adelaide remains one of the most stable capital city housing markets with minor price rises over the last year
Adelaide rents have continued to rise through the COVID period up one tenth of a per cent over the June quarter.
The detail in the data shows that unit rents have recorded a 0.2% decline over the quarter while house rents were up by 0.2%.
Across the broad valuation cohorts Adelaide’s more expensive properties have recorded a slightly higher growth reading than lower value properties.
The upper quartile values rose by 0.9% over the June quarter while lower quartile values were up a smaller 0.7%.
A similar trend can be seen across Adelaide’s sub-regions with the Western suburbs recording a 2.1% rise in values over the quarter, while at the other extreme values across the southern region of Adelaide were down 0.1% over the same period.
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 wondering what will happen to property in 2020–2021 you are not alone.
You can trust the team at Metropole to provide you with direction, guidance and results.
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