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Australia Housing Market 2021

December 15, 2020

Australian Property Market Forecast 2021

Australia’s housing market looks to be turning around after home prices and sales had deteriorated from March to September.  November’s sales stats were a pleasant surprise, creating forecasts of improvement in 2021.

Trends in the Australian property markets mirror the same trends you’ll see in the UK and the US housing market with home prices rising in all but the big cities.

Australia’s average home prices rose overall by .4% Yet Sydney and Melbourne saw rising prices too, up .4% and .7% respectively.  See the Australia housing price forecast below for 2021.

What’s Causing the Rising Home Prices?

  1. continuing low mortgage rates
  2. Australia’s excellent response to Covid 19 transmission
  3. Jobkeeper wage subsidy mitigated the severe employment threat
  4. business reopening well, increasing optimism for the economy
  5. fewer homes for sale
  6. first time home buyers coming back

Buyer demand is mostly being fueled by a surge in owner-occupiers rather than investors, looking to take advantage of historically low interest rates, generous government incentives and an increased state of normality.” said CoreLogic’s Head of Research Tim Lawless.

Australia Battling Covid 19 Beautifully

With some regions reporting zero cases of recent, it will be easy for buyers and lenders to feel good about the 2021 Australia real estate market.

Australia Covid Cases. Screenshot courtesy of Google.

Corelogic’s experts believe home prices will reach the pre-Covid pandemic highs during the next month or February.  Home prices in Brisbane, Adelaide, Hobart and Canberra reached new all time highs at the end of November.  See the price chart below.

As Australia enters its hottest summer months, buyers are out looking for affordable homes. As supply slips buyers will be willing to bid up to capture a home.

Australia home price growth

Australian home price change. Screenshot courtesy of Corelogic.com.au

As the vaccinations begin to lift Aussie spirits, we can see the Australian housing market begin to thrive in 2021. As construction rebounds, we might see prices moderate a little.

2021 Forecast a Little Brighter

ANA predicted housing prices would continue a decline to finally bottom out in June 2021.  Yet, the decline has ended already.

They believed the Australian housing market recovery would be curtailed by continuing high unemployment (above 7% until 2022).  As we know via other housing markets, that unemployment among the poor doesn’t necessarily translate to lower home prices. The US suffers 6.7% unemployment (compared to Australia’s 6.9%) yet its housing markets are booming, at least in price.

Supply is a problem in all markets including the UK, Canada, Germany and the US. and that will crush sales for some time.

At least the number of new listings added over the last month rose by 25.2%, while total housing stock levels increased by less than 1%.

RBA was pessimistic about Melbourne home prices increasing before April 2021 (75%, 18/24), while one-third (29%, 7/24) expected the market to stagnate until 2022 or beyond.  A lot of pessimistic views that are likely being revised right now.

Australia Home Prices

Home Values beginning to Rise Again

Month by Month home price change. Screenshot courtesy of Corelogic.com.au

 

Price change for regions and cities for the past 12 months.  Melbourne and Western Australia region have much further to come back from their pandemic lows.

Change in home prices, Australian cities. Screenshot courtesy of Corelogic.com.au

 

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Corelogic  Says Virus Very Hard on Melbourne and Sydney

CoreLogic’s head of research, Tim Lawless says Australia’s housing markets are hampered by social distancing policies and border closures which directly impact labour market conditions and public sentiment. He says the Virus outbreak has been particularly hampered Melbourne and Victoria.

Corelogic recounts Sydney’s market results for the month of October 2020.

Housing trends are similar to what is seen in the US housing market and the UK property market, where the work at home mandate is allowing renters and homeowners in dense areas to move outward to the suburbs or towns where housing is available.

The strength of that outward tide tends to stemmed only by limited supply of housing outside the major cities.

That trend however tends to help revitalize smaller towns and suburban districts, and lower real estate to more affordable levels in the big cities. Lawless says the degree of infection or success in containment of Covid 19 will determine the economic and housing consequences for Australia going forward to 2021.

As the chart reveals, Sydney, Brisbane, Melbourne and Perth haven’t performed well during the past 3 months. Regional markets haven’t been hit as hard because they’re not as dependent on tourism or foreign migration, as the big cities of Melbourne and Sydney are.

Australian Consumer Sentiment Index

The Westpac-Melbourne Institute index consumer sentiment readings were recovering through the pandemic period to July. However it has fallen steeply in August, down 9.5%, which is about where it was back in April. Corelogic believes the latest round of social distancing restrictions put in place across Victoria, along with new concerns about outbreaks and a surge are making buyers cautious.

 

Housing Price Forecast Australia to 2021

Screenshot courtesy of macrobusiness.com.au

Rent Prices in Australia

Change in Australian rent prices. Screenshot courtesy of Corelogic.com.au

Capital city house rents rose 0.7% in November while unit rents fell -0.6%.  CoreLogic data shows house rents are performing better than unit rents since last April.

As is typical in the UK and America, across all Australian capitals, unit rents have fallen by -5.4% since March while house rents have risen 1.1%.  Much of the unit rent decreases are attributed to Melbourne and Sydney where unit rents are -6.6% and -7.6% lower due to the flight of renters outward and much higher joblessness.

Reportedly, advertised rent prices have fallen 0.7% in November over the month in major cities.

Higher Rents and Rent Yields Expected

As international borders open and tourism and trade resume, it’s expected that rent prices will grow in 2021.

Unemployment Not as Bad as Forecasted During Pandemic

Australia’s treasury secretary Steven Kennedy revised previous forecasts of 10% unemployment by September, but is pulling that number back to 8%. “Business and consumer confidence is returning. We are well ahead of where I imagined we would have been in March.” said Mr. Kennedy in an AFR interview.

According to abs.gov.au/ausstats/, Australia’s seasonally adjusted estimate of employment increased by 114,700 people in July 2020, with:

  • unemployed people up by 15,700 people;
  • unemployment rate grew by only 0.1% to 7.5%;
  • the underemployment rate fell 0.5 pts to 11.2%;

Employment had increased by 114,700 people (0.9%) between June and July 2020, with full-time employment increasing by 43,500 people and part-time employment increasing by 71,200 people. Compared to a year ago, there were 282,800 less people employed full-time and 131,700 fewer people employed part-time.

The temporary shutdown and reduction of farm and meat factory workers, along with construction workers in Victoria along with the unemploying of thousands of pre-school teachers/assistants are just some of the factors working against the housing and rental markets.  A resurgence of Covid 19 in schools and out into their communities could be very damaging again to the economy.

The losses of about 230,000 foreign students is yet another factor weighing on the revenue side for Australia.  If a covid vaccine is still a year off, it might be hard to be cheery about high-density apartments in Melbourne or Sydney.

 

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The longer the downturn continues, the more pressure Australian banks will experience with their 1.7$ trillion debt.  That mortgage-related debt may be one of the highest in the world.

Will Rent Yields still Grow Significantly?

Australia Rental Yields – Screenshot courtesy of Corelogic

Will Australia’s Economy be Okay in 2021?

Australia’s economy was bolstered by widening trade surpluses as the country’s GDP grew to $1.89 Trillion in 2019. Yet lower commodity prices, reduced foreign investment, consumer debt trouble, and China trade scuffle is making a few experts warn of a housing crash.

more than 60% of bank loans in Australia are in residential properties, making it the highest proportion in developed countries and more than double compared to the US” — from post in the Singapore Business Review

The 6 week shutdown of Victoria is having a sizable impact for the Australian economy and estimates for unemployment are rising.  Cutbacks in jobless aid announced are making it tough for many to be able to afford rent payments.

Australian investors, landlords, and property managers will likely feel warm winds of more sales in 2020. Property managers will want to look into property management software platforms to help them drive even more profit from their portfolios.

Australian GDP declines in 2020. Screenshot courtesy of Tradingeconomics.

Prices and rents here are much lower than Europe or North America.  With remote work becoming more common around the world, immigration and tourism could boom once the Corona virus vaccines are distributed. Are Australian rent prices a concern? Let’s take a look so you can determine the price/rent ratio and the ROI on buying Australian real estate.

Sydney Australia

For over-indebted Australian mortgage holders, it might be the end, but for savvy investors, 2019 might bring some outstanding buying opportunities for rental income property.  With or without the negative gearing proposed by the labor party, experts suggest rental property investors can still come out ahead.

Prices Dropping Down Under

Compare the two charts below to see how prices have changed over the last months. Earlier this year, rent prices in Sydney dropped 8% overall while house price fell by 9.2%.

The general consensus is that Australia’s housing market has resumed its upward momentum during the last half of 2019, and is ready for solid growth in 2020.

Perth Australia

Australia recorded its strongest trade surplus of all time in March. It’s down slightly to AUD $8.8 billion.

 

As the above graphic shows, after 6 years of price growth of about 8% per year, prices began to fall in 2017. This chart doesn’t show the precipitous drops of the last month. Fears of oversupply of housing will cause developers to cut back on development which decreases investment and tax revenue for governments and slows the economy. Real estate is big part of any economy including Australia’s and the loss becomes iterative.

Chart courtesy of ABS.gov.au

Up till now, the housing and economic outlook for Australia were strong:

Screen Capture courtesy of KPMG

 

Australia Rental Price Update

Apartment and house rents have taken a decided turn for the worse in late 2018  The rental markets of Sydney, Melbourne, and Brisbane, are showing strong downward motion. Rent prices are flat in Adelaide, Perth, Canberra, and Hobart. Housing market prices declined in Sydney, Melbourne and Perth, but rose in other cities.

Rent prices are flat or went down for the most part in November.  See more of the Australia rental housing market stats at Rent.com.au.

Screenshot courtesy of Rent.com.au

Much of the Australian housing market predictions will be influenced by international trade, China imports, and China’s access to its traditional export markets. Australia’s exports were in decline.

Predictions for Housing Markets in 2021

The housing markets did contract hard in the pandemic period across the globe.

The stubbornness of US President Trump’s “America First Policy” and tariffs against China, the ripple effects will take their toll on the Australian economy in the years ahead.  And Australia has its own issues with China which may impact exports to that country.

 

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We’ll keep you updated as Australia’s housing market progresses in 2020.  Take a good look at the California housing predictions and the best cities to invest in to capture maximum yields.

 

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See also: Property Management Software | Property Management TipsProperty Management Companies |  Housing Market Sydney | UK Property MarketProperty Management Accounting  | How Corona Virus is Changing BusinessBest Cities to Buy Multifamily | Property Management TrendsProperty Accounting SoftwareControlling Property Management Costs |  Property Management Reviews |  Property Management Trends  | Property Management Metrics | California Housing Predictions |  Best Cities for Buying Rental Property |  Start a Property Management Business | Rental Software

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