B Invested

Property Market Update – 1st half of 2021

Back in January, economists and banks were predicting double digit growth for multiple Australian property markets for 2021. It was a rare situation in which all capital cities and regional centres were primed for property value gains at the same time.

For many, this seemed like a bold or even far-fetched prediction, but here at B Invested, founder Nathan Birch was even more bullish. He believed we were on the cusp of a major property boom.

So, how have all those predictions panned out? Well, recent figures show we passed double digit growth for the year before the halfway mark. The boom is indeed real, even as lockdowns continue to pop up and shut down economies in different parts of the country at different times.

Where are we at?

CoreLogic data shows capital city property values have risen more than 12% already for the year.

Sydney has led the charge with 15.8%, followed by Brisbane-Gold Coast with 12%, Melbourne with 10%, Adelaide with 9.1% and Perth 7.3%

Rental demand is 19% below where it was at in January, according to REA figures, but before you start tearing your hair out, remember there was an almighty Covid-related surge in demand at the back end of last year. That demand peaked in January, so while it has come off the boil significantly, rental demand is actually still 25% higher now than it was during 2019.

And demand is likely to rise again, either on the back of a return to continued lockdowns, or on the flipside, as a result of the reopening of borders to foreign workers and students when Australia is deemed suitably vaccinated.

Vacancy rates are tight in most markets, with Melbourne the highest rate at 3.7%, followed by Sydney with 2.9%, according to the latest numbers. These are still tight considering Sydney and Melbourne have the two biggest inner city rental markets, which were caused the most pain by lockdowns. Brisbane (1.3%), Perth (0.9%) and Adelaide (0.7%) are as tight as can be.

Pandemic has propelled property

Surely if the economy was getting smashed and people were losing their jobs, they wouldn’t be able to service debt and therefore property prices would tumble due to lack of demand?

Not so. The RBA took interest rates all the way down to 0.1%, meaning banks were offering home loan rates below 2% and it has never been cheaper to service quality debt like property. On top of that, the government used stimulus to prop up the markets and keep everyone going. Grants for home buyers, home builders, home renovators and those forced back into the job market saw cash flow back into the economy. Meanwhile, lenders granted mortgage holidays to those who would otherwise have had to default, meaning desperate sales of mortgage in possession properties were minimised.

People’s habits changed

The shock of realising that they can be locked down and lose their jobs out of nowhere caused Aussies to be more cautious with their money. Beside the fact they were not able to spend it on dining at restaurants or on travelling anywhere due to restrictions, they were much keener to sink every spare dollar into acquiring and servicing debt on their homes and investment properties. These habits won’t change any time soon, especially with rates set to remain low at least for a few more years, and that’s if they don’t go even lower.

So when is the right time to buy?

We can expect more of the same growth as demand for property is yet to peak. So is the demand for renovations. And the RBA has shown itself to be very cautious when it comes to the idea of winding back quantitative easing measures.

But this doesn’t mean prices will come plummeting down any time soon. The naysayers have been predicting market crashes for decades, but they just don’t seem to happen.

The right time to buy is now, it’s just a matter of making sure you buy in the right place and for the right price. If you wait to time the property market, you may never buy.

And the more time you take to get into the property market, the less time you will have in the property market, which means fewer growth cycles you are benefiting from.

If you need help getting started, get in touch with b Invested, we can help you come up with the right plan for you.