Welcome to the Treak Real Estate Property Update: our monthly round-up of news from the Sydney and national property markets, as well as what’s been happening here at Treak!
The numbers behind the housing surge
What do you get when you combine low levels of stock with extraordinary levels of demand? Surging house prices around Australia.
Housing markets have started 2021 with a bang. The low supply/high demand market has been further driven by the media, which has constantly reminded us that we’re in the midst of a property boom, fuelling feelings of FOMO in buyers: they want to get in before they’re priced out.
The result is seen in the numbers. CoreLogic has just announced that Sydney property values have not only recovered, but now surged beyond their 2017 peak. In fact, ANZ has forecast incredible growth across the Australian property market in 2021:
Sydney: +8.8%
Melbourne: +7.8%
Perth: +12%
Brisbane: +9.5%
Adelaide: +6.3%
This effect is set to be more pronounced in high-end properties. If we order Australian properties by value, we see that during February, the top 25% jumped 2.7% in value, an increase that was well above the middle 50% (+1.5%) and the bottom 25% (+1.2%).
The factors driving these surges are many and varied. The worst of the pandemic seemingly behind us, the Australian economy is tipped to grow by 4.9% this year, after contracting -2.8% in 2020. The record low cash rate of 0.1% not only remains, the Reserve Bank has also suggested that it will stay at that level or even lower for the next three years.
It isn’t all sunshine and lollipops though – some commentators are concerned that the end of JobKeeper and the mortgage deferral system in March will have some ripple effects.
Back in Sydney, houses in the city’s inner and middle rings will continue to perform strongly, as will apartments in popular areas such as the East and the Northern Beaches. On the flipside, demand for apartments in high rise towers is likely to fall, particularly in high supply areas, with investors considering the added risk around high vacancy rates, a lack of capital growth and potential construction defects.
Record Sydney auction rates
Sydney was host to 1048 auctions this week, +242 on the previous week and higher than the 946 this time last year. The preliminary clearance rate came in at 87.5%, a little higher than last week’s final rate of 84.3%, and well beyond the 58.8% of this time last year. Sydney’s final auction clearance rate has held above 80% for the past six weeks, yet another sign of the strength of the market.
2021: A big year for upgraders
The current oversupply of rental units in many areas has seen tenants spoilt for choice. This means that many are no longer willing to live in substandard accommodation, taking the opportunity to find something better, or saving for a deposit to take advantage of first home buyer incentives.
The upgrade trend extends to homeowners too, with many looking to move to larger homes in better neighbourhoods. In fact, a recent survey suggested that one in three homeowners are looking to sell their current property in the next five years. While seachangers and treechangers continue to make up a portion of upgraders.
A better home also doesn’t necessarily mean bigger. Many Baby Boomers are looking to upgrade their lifestyle by moving out of often tired family homes into apartments or townhouses in ’20-minute’ neighbourhoods close to family and friends.
Factors set to drive property price growth
Many experts are suggesting that we may be at the beginning of a period of sustained property growth over the next two to three years. So what factors will drive this growth?
Population growth: As soon as borders open and immigration recommences, the Australian population will once again begin to increase. The fact that Australia has shown itself to be one of the world’s safe havens will only spur the interest of potential migrants.
Low housing supply: The lack of properties for sale has created a seller’s market in which buyers are pushing up property prices, particularly of rare ‘A-grade’ homes and investment properties. It will also take some time for development to catch up with this demand, with a shortage of large projects on the back of the pandemic.
Interest rates: With record low interest rates fuelling the hot property market, there have been calls for regulators to pump the brakes. But Philip Lowe, the Governor of the Reserve Bank of Australia, has quashed these suggestions. “Our judgment is that we are unlikely to see wage growth consistent with the inflation target before 2024. This is the basis for our assessment that the cash rate is very likely to remain at its current level until at least 2024.” He did however state that this position could be reversed if lending standards deteriorate and people begin borrowing ‘ridiculous amounts’.
More renters: Higher prices = lower house affordability. If forecasts hold true, 40% of our population will be renters looking for accommodation in the coming years.
First home buyers: Despite affordability issues, first home buyers continue to perform strongly, driven by FOMO, forced lockdown savings, cheap finance, and first home buyer schemes and grants.
Making sense of a changing market
Your home will more than likely be the most expensive asset you ever purchase. With the property market in the midst of real change, and with low supply and high demand pushing prices up, the purchasing process is only becoming more complex and risky.
Looking for some assistance in navigating this process and want an expert ear to ask important questions and listen to your property dreams and concerns? If you’re in need of advice and some peace of mind, I’d love to steer you in the right direction. If you want help in making the smartest possible property decisions, contact me here!
Thanks for reading
And that’s it from us for the months of March and April! Thanks for reading, and be sure to forward our newsletter onto any interested friends!
Until next time,
Renae Treak
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