2020 residential review: resilient markets set for growth
2020 residential review: resilient markets set for growth
Most of us are looking back over the past 12 months with a sense of shock and awe.
Livelihoods have been upended and lives lost.
The usually conservative Reserve Bank of Australia has resorted to printing money to keep the nation afloat.
We’ve been locked in our homes, our suburbs, our states and our continent.
While these portents of doom could never have been foreseen when the clocks struck midnight on 1 January 2020, when the pandemic peaked there were no shortage of commentators, economists and front bar patrons heralding the imminent collapse of residential property markets.
But if there is one word that has encapsulated the national psyche, as well as the national property market, it is 'resilient'.
“A resilient housing market that has weathered the economic pressures of Covid-19 together with lower interest rates will give home buyers and investors’ confidence.” - Andrew Bartolo, Head of Home Loans, ME Bank.
“The most striking thing about this year has been the fact that the property markets have proven to be far more resilient than the experts predicted.” - Patrick Keenan, Chairman, Fortis.
“Transactions at the top end of the prime market were resilient in 2020.” - Michelle Ciesielski, Head of Residential Research, Knight Frank.
Despite the economic and social upheaval that the country, and indeed world, has endured in the past 12 months, it is remarkable that property industry confidence has made its highest jump on record as 2020 comes to an end.
Listings, clearances and property prices are on the upswing riding a resurgence in consumer confidence with many buyers and sellers catching up on lost time.
Australia had its first recession in 28 years, wages were down 4.3 per cent.
The consensus seemed to be building that the national decline in property values could reach 10 per cent, with worst-case scenarios suggesting prices could fall by as much as a third.
But between March and the start of October, Australian home values fell just 1.7 per cent, with the next two months, and probably December too, posting gains in almost all capital cities.
The saviours of the property market were low-cost debt, as interest rates hit emergency level all-time lows, and mortgage deferrals that allowed Australia’s households — who collectively boast a household debt to income ratio of an eye-watering 185 per cent — to overcome sudden income losses and still meet their lenders’ demands.
State of play
Each state weathered the storm waters differently and faces different challenges and opportunities in 2021. But by November, every capital city in Australia saw an increase in median house prices for the first time since the start of the pandemic in March.
Here’s a look around the country.
New South Wales/ACT
Sydney housing values are still 4.8 per cent below their 2017 peak and the recovery that was taking place late in the year is still susceptible to the dreaded COVID outbreaks, such as the current one that has broken out in the Northern Beaches areas.
“As we reach the final stages of 2020, it is clear that our industry and the property market generally has withheld the shocks that were previously forecast,” Adrian Kelly, President of The Real Estate Institute of Australia, said.
“The wild predictions of thirty percent of our tenants becoming unemployed has proved to be unfounded, with our members reporting less than five percent of tenants being impacted in the larger capital cities, in particular Melbourne and Sydney, and less than one percent in regional locations.”
The other 99 per cent had cause to grumble in 2020, with the prestige 1 per centers faring best in 2020 and poised to boom in 2021. The highest median house value was once again in Darling Point, and the highest median unit value was found in Point Piper.
“Transactions at the top end of the prime market were resilient in 2020 and buyers will need to act quickly to capitalise on softer prime prices rounding out 2020, with all five cities expected to experience stronger price increases next year,” Ms Ciesielski of Knight Frank said.
Sydney reported the highest Increase In average median daily asking prices for houses over November - up sharply by 3.5per cent. Sydney maintained Its most expensive position with the highest average median asking price over November at $1,154,216 and significantly ahead of the next highest Melbourne at $847,569.
When it came to end of year auction rates, Canberra was the stand-out performer with an 87.5 per cent auction clearance rate, up from the previous week’s 87.1 per cent and beneficiary of a dramatic surge from 63.2 per cent at the end of 2019.
Victoria copped the worst of the pandemic lockdown in 2020, wreaking havoc on many businesses and shuttering the CBD.
Inner city rental markets like Melbourne’s have been particularly impacted by the closure of international borders, where historically high demand from overseas migrants has been disrupted. Notably the vast majority of overseas arrivals to Australia are initially renters.
According to Eliza Owen, CoreLogic’s Head of Research Australia, the inner-city Melbourne market is seeing greater risk in 2021, with an increase in listing stock weighing on a recovery in values.
“Despite Melbourne dwelling values joining a broad-based recovery trend in November, and values rising 0.7 per cent in the month, the disproportionate volume of stock to sales volumes may slow the rate recovery across the city in 2021,” she said.
Regional Australia has out-performed the combined capital cities market and recent internal migration data reveals more people are leaving the cities for regional areas, especially in Victoria.
The highest rental yields in the state in 2020 were regional, with Mortlake, Warrnambool and towns across the southwest region recording 9.2per cent yields. Murtoa, in the northwest of the state, recorded the highest median house price growth of a whopping 22.4per cent.
Sunshine Beach on the Sunshine Coast has seen the highest annual capital growth (27.6 per cent) in houses nationally, compared with 2019 when St Kilda in Melbourne saw the highest housing growth.
Kai Chua, Studio Director at DKO Architecture, said the property market is now being driven by lifestyle choices.
“Throughout 2020 we saw that working remotely is a reality that is likely to stay [and] DKO’s Brisbane studio in particular has seen enormous growth for this very reason,” he said.
“We expect that 2021 will be driven by inter-state migration and people no longer being tethered to their working location.”
Following five months of consistent declines in residential property values, Brisbane posted a 0.6 per cent rise in combined dwelling prices for November.
The current median value for a Brisbane house is $568,629, while the current median value for a Brisbane apartment is $388,661, 1 per cent lower than 12 months ago.
The vacancy rate in Brisbane as a whole remained consistent at 2 per cent while rents in the unit market in Brisbane have now seen price falls of -1.9 per cent since the onset of the pandemic.
Brisbane’s auction success rate declined to 52.9 per cent from the previous week’s 59.9 per cent, however, the Queensland capital’s result was also better than the 44.8 per cent at the end of 2019 before the COVID-19 pandemic.
In the regions, West Gladstone rental yields soared to 17.4 per cent, as mining centres around the country experienced similar stories of growth.
Sellers in Tasmania are officially among the happiest in the country.
RateMyAgent’s mid-quarterly Price Expectation Report (1 October – 15 December 2020) asks successful vendors if the sale price achieved was above, below or in line with their expectations.
The ACT (63 per cent) was the happiest state/territory followed by Tasmania (59 per cent).
Property investment activity shapes as most likely to increase across smaller capital cities such as Hobart and Perth. In Hobart, where gross rent yields are 4.6 per cent across dwellings, the investor share of mortgage finance increased from a recent low of 16.4 per cent in August 2020, to 21.8 per cent in October across Tasmania.
The supply of housing has been constrained in Tasmania for a long time but population growth returning, demand is outstripping supply.
House prices in Hobart have gone from strength to strength, rising to record levels in recent months despite the coronavirus pandemic. After five years of price growth, Hobart continues to outstrip the others and has seen the steepest rent hikes off the back of an incredibly low vacancy rate.
In the happiness quotient mentioned above, South Australian sellers were just behind their Tasmanian counterparts at 53 per cent.
Certainly for some, there was cause for celebration. Unit values in one of Adelaide’s western suburbs climbed more than any other capital city location across the country this year. Findon recorded the highest unit value growth across the country over the past year, notching 22.2 per cent to a median value of $329,158.
Real estate agents in South Australian regional areas have been reporting a surge in sales.
Harcourts Adelaide Hills principal, Kim Shorland, told ABC Radio Adelaide they were experiencing “incredible” demand for residential properties, with most people coming from the city plains or the eastern seaboard.
"The stock is definitely low, it's selling in a couple of weeks," she said.
Perth is among the nation’s hottest markets to watch at the moment, following a five-plus year decline in housing values.
Perth housing sales have surged to their highest level since the city's last property boom seven years ago, partly due to a tightening of supply and buyers flocking to the supposed COVID-19 safe haven of Western Australia.
In the three months to November, established home sales in Perth were 29 per cent higher than in the same period last year, according to data from the Real Estate Institute of WA.
Rent values rose a remarkable 8.2 per cent in the year to November.
REIWA President Damian Collins said while house prices were largely stable over the last 12 months, they were expected to jump by up to 10 per cent from January.
The lowest mean price for residential dwellings may be in the Northern Territory ($425,200) and property prices fell in Darwin by 0.7 per cent for the year, but it is a market that is being buoyed by the resource sector’s resurgence.
Darwin had one of the highest annual increases in house prices during the third quarter of the year. According to a Domain report, house prices in the city went up by 7.2 per cent, faster than the annual gains reported in Sydney, Melbourne, and Brisbane.
The national rental index registered a 3.2 per cent increase for houses and a 3.1 per cent decline for units over the year to November. Perth reported the highest increase in rents for houses at 8.6 per cent but it was Darwin that posted the strongest gain for units at 6.3 per cent.
Business Manager at Habitat Real Estate, Jess Lee, told API Magazine that inner-city suburbs such as Fannie Bay, Nightcliff, Parap, Larrakeyah and Stuart Park were seeing quick sales, with plenty of competition among families seeking more space.