The honest truth about where property prices are headed in 2021

Many property markets around Australia are likely to experience double digit growth this year driven by a confluence of factors that will underpin  strong demand for well located properties.

After a 3 year lull in property values capital city property prices have surged this year and have recently risen to new highs surpassing their previous 2017 peaks.

So let’s look back at the history of property prices to help you look forward. Property Prices

Firstly it’s important to recognise that property is a long term investment and value growth compounds over time, so it’s fair to say that the sooner you start investing in property, the better you’ll end up financially.

“Now that’s not fair,” I can hear new investors say

Of course I can understand your frustration if you see our property markets surging ahead and you don’t have the funds to get a foot on the property ladder.

And to compound it somewhat, I’ll share with you this titbit of information one of my mentors taught me many years ago…

The best time to get into real estate was 20 years ago. However I would add — the second best time is today.

Of course, who wouldn’t like to buy their parent’s house for the price they paid for it years ago?

Until we master the scientific breakthrough of time travel, it’s not possible to go back in time and buy property while it’s still “cheap”.

But if that were possible, we could snag some absolute bargains.

If we take a look back at what real estate prices were like a few decades ago, the facts and figures are eye-wateringly appealing.

I started investing in the early 1970’s.

In 1973, the median house price in Sydney was just $27,400.

Renting would cost you an average $26 per week, and according to the Australian Bureau of Statistics (ABS), the average weekly wage was $111.80.

Buying a house at this time in in Brisbane cost $17,500 and in Melbourne it would set you back $19,800.

The first property I bought in Melbourne cost me $18,000.

I went halves with my parents and we got $12 a week in rent – and we were excited!

Oliver Shane Economic Australia

And if you were to purchase the average house in Canberra back then, it would cost you around $26,850, whereas a house in Hobart would’ve seemed a steal at the low median of $15,200.

As for Perth and Adelaide, the housing market was affordable with a median of $26,850 and $16,250, respectively.

Compare that with the pricing of houses these days, and it’s a vastly different story.

According to the latest housing data from CoreLogic, median house values at the end of January 2021 were:

  • Sydney — $879,299
  • Melbourne — $692,162
  • Canberra — $686,524
  • Brisbane — $527,826
  • Hobart — $523,932
  • Perth — $484,280
  • Adelaide — $473,170
  • Darwin — $426,215

The first thing we can deduce…

In the space of 47 years, all capital cities have recorded massive price growth.

Some have performed better than others, clearly.

But the fact remains that anyone who bought a property in 1973 and still owns it now, has profited very handsomely from their investment. Property Prices2

The second thing we can deduce?

Time in the market, not timing the market, is a surefire strategy for success when you’re building wealth for your future.

There are a number of factors that influence property prices, but in particular, our population growth, the increasing wealth of our nation, and falling interest rates have driven up real estate values.

But things have changed recently...

  • Population growth is slowing because immigration is restricted due to the closing of our international borders
  • Wages growth and inflation will be low for some time to come
  • Interest rates have fallen to historic lows and can’t fall much further.

So can property values still keep growing?

That’s a good question, considering there are still many economic headwinds that will affect us as some parts of Australian industry are still suffering the effects of the coronavirus crisis.

But there will also be a combination of growth drivers that should lead to a period of strong property price growth in 2021 and into 2022 with a confluence of the following:-

  • Federal Government spending, initiatives, and infrastructure projects
  • State Government spending and infrastructure initiatives including stamp duty savings
  • Historically low-interest rates making borrowing as cheap as it has ever been and therefore holding investments or taking out a home loan very affordable
  • The security that interest rates will remain low for a number of years will encourage people to borrow
  • The easing of credit approval criteria could allow many people to borrow considerably more than they could before.
  • A return of international demand for Australian property
  • A return of immigration and students to Australia is also possible.

Thinking strategically, this means that now, at the beginning of a new property cycle will be a window of opportunity for savvy investors to really amplify their wealth position.

OpportunityI went on record last year saying that our property market turned in October 2020, and the facts now prove I was right as both buyers and sellers have re-entered the market and property values have been steadily increasing since then.

In fact we’re already experiencing FOMO (fear of missing out) which is pushing property values even higher.

And for those worrying can property values keep increasing remember how Sydney property prices increased from around $27,000 in 1973 to $879,000 in 2021 — can you imagine where they will be a few decades from now?


NOW READ: Property prices cannot keep rising at the same rate

Now could be the best opportunity in decades to get into the property market.

It is likely the confluence of multiple growth drivers will lead to continued property price rises throughout 2021 and well into 2022, but then once we absorb the catch-up demand in the market property price growth is likely to slow down.

A leading indicator of future price growth is housing finance approvals, and at the end of last year, we saw a big boom in lending – up 40% to the end of the year from the very low levels of media.

While average capital city home prices are likely to rise by around 10% this year and a little less next year, making such broad-brush statements can be misleading.

It is likely that houses will outperform apartments, and while currently all segments of the market are performing strongly, higher-end, more expensive properties are likely to outperform the cheaper segments of the market.

Investor interest is already picking up, and as they return to the market, as they always do as the cycle moves on, this will extend the length of our property price boom.

Sell Buy

As the news gets better for property and the media reports rising auction clearance rates, rising house prices and increasing consumer confidence, a whole group of new buyers will also enter the property market, buoyed by a strengthening economy, growing employment, and renewed confidence in the direction Australia is heading.

This will serve to increase competition for property which will potentially drive up prices and most importantly, absorb quality stock, making it harder for you to secure a solid investment.

This is likely to happen for two main reasons:

1. Confidence. When we are more confident about our financial future and our jobs we make big buying decisions such as purchasing new homes or investments.

2. Competition. Finance will be more freely available as a result of the changes due to come into play in March this year, and those buyers who were previously restricted from borrowing (due to them not meeting the banks’ criteria, and/or temporarily losing or dropping their income during the pandemic) are likely to be be back in the market.

We’re in for a 2-tier property market

Now don’t get me wrong. Not all property markets will rebound strongly this year.

Properties located in the inner and middle-ring suburbs, particularly in gentrifying locations, will outperform cheaper properties in the outer suburbs.

The reason being, Covid19 has adversely affected low-income earners to a greater extent than middle and high-income earners who are likely to recover their income back to pre-pandemic levels more quickly, while many have not been hit at all.

High-rise apartment towers in our CBD’s which were already suffering from the adverse publicity of structural problems prior to Covid19 will now become the slums of the future as they are shunned by homeowners and investors. Neighbourhood Suburb

And like after every downturn, there will be a flight to quality properties and an increased emphasis on liveability.

As their priorities change, some buyers will be willing to pay a little more for properties with “pandemic appeal” and a little more space and security, but it won’t be just the property itself that will need to meet these newly evolved needs – a “liveable” location will play a big part too.

To many, liveability will mean a combination of:

  1. Proximity – to things like parks, shops, amenities and good schools
  2. Mobility – access to good public transport (even though this may be less important moving forward) or a good road system
  3. Access to jobs

The bottom line is that for those with a secure job and who have their finances under control, now could be the best opportunity in a decade to set themselves up for the opportunities that will present themselves as our property market head into a perfect storm with a confluence of growth drives in 2021-22.


NOW READ: What type of property will be popular post Coronavirus?


It should come as no surprise that getting a good team around you will be an important investment and not an expense and should allow you to build a property portfolio that will go a long way to replacing their income in the future.

At the same time, you must learn that property investing is not a get-rich-quick scheme and to achieve your future financial goals you will have to slowly build a substantial asset base and not chase short-term cash flow as many beginning investors do.

Here are a few other final tips so you’ll know exactly how to invest:

  1. Formulate a plan: understand your end goals – what you want to achieve – and then make investment decisions accordingly.  Property 2
  2. Be cautious: You’ll find everyone is happy to give you advice. Rather than listening to well-meaning friends, it’s important to only listen to people who have achieved the financial independence you’re looking for and who’ve maintained it through a number of property cycles.
  3. Understand the difference: between a salesperson and an advisor. Many salespeople are cloaked as advisors and while they suggest they’re representing you, in fact, they are representing the seller or a property developer. Only take advice from someone who is independent and unbiased rather than someone who is trying to sell you something.
  4. Be prepared to pay for advice: I’ve found that good advice is never expensive. In fact, it’s much cheaper than learning from your property investment mistakes.
  5. Not everything that glitters is gold: often when you start out it can be tempting to see opportunities everywhere. The problem is you don’t yet have the perspective to decide what is a good investment and what is not.

Property doesn’t discriminate; it doesn’t care who owns it.

The residential property market is worth well over seven trillion dollars today and over the next decade, it will increase in value by billions and billions of dollars.

If you get it right, you can have your share.

Now is the time to take action and set yourself for the opportunities that will present themselves as the market moves on in 2021

Metropole

If you’re wondering what’s ahead for property you are not alone.

You can trust the team at Metropole to provide you with direction, guidance and results.

In “interesting” 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.

If you’re looking at buying your next home or investment property here’s 4 ways we can help you:

  1. 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
  2. Buyer’s agency – As Australia’s most trusted buyers’ agents we’ve been involved in over $3.5 Billion 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.
  3. Wealth Advisory – We can provide you with strategic tailored financial planning and wealth advice. Click here to learn more about we can help you.
  4. 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.

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.

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Michael Yardney

About

Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media. Visit Metropole.com.au


'The honest truth about where property prices are headed in 2021' have 5 comments

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    November 29, 2020 Rob

    My comment is off topic, but I resent paying strata fees on and apartment or unit. From my experience it’s and on going expense that has no benefits for the landlord. Hopefully you may have information that covers this topic.

    Reply

      Michael Yardney

      November 29, 2020 Michael Yardney

      Rob, yes there is a blog on this on property update. Did you not know the strata fees you would have to pay when you purchased your property? Unfortunately some complexes have excessive strata fees, but most are well managed and they are the sort of fees you would have to pay if you owned a property with no common land, in other words you still have to pay insurance, maintenance etc

      Reply

    Avatar

    November 25, 2020 JOHN TOZER

    What would happen if the stock market collapsed do you think ?

    Reply

    Avatar

    August 26, 2019 Ben Loveday

    What you say about long term growth is 100% true for the entire history of all Australian cities. However all our cities are in a young constantly expanding nation. As a nation gets older however and as it grows into its resource base, the tail winds of expansion start to slow up. In the last decade we have seen reduced resource prices send Perth’s property market into a tail spin, and the devastation in Adelaide’s northern suburbs by the retreat of GMH and BHP. Looking ahead, there are massive headwinds which could either support Australia’s future growth (if harnassed) or bring it to a standstill if ignored: the worldwide transition to renewables and electric vehicles, the imminent ascension of China to the number 1 economic powerhouse of the world, closely followed by India, and the rise of the services and consumerist economies of the world. Australia is a minnow in terms of GDP and population, with too much reliance on bulk primary resource extraction. To continue the growth described, Australia will have to deploy its most precious asset: it’s spirit of innovation.

    Reply


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