Housing demand has gained momentum over recent months with prices and new constructions picking up sharply, with activity particularly strong for houses and in regional markets areas such as Newcastle and The Hunter seeing a price increase of around 9%. Indications from recent months sales are seeing areas such as Byron Bay up 40%. Auction clearance rates are over 80% in most areas and the medium term forecast for property price changes is around 5% annually to 2024. Creating an environment where the current property market conditions could be described as ‘Hot to the touch’. Australia is not alone in this growth, as the same has been seem in the property markets within; US, Canada and New Zealand.
So whats driving the property markets to new heights ?
Record low interest rates
In response to the need for urgent stimulus, the central banks of Australia, Canada, United States and New Zealand all cut their respective cash rates to near zero. Lower mortgage rates have increased borrowing capacity and seen many households improve their financial position through mortgage refinancing. Low borrowing costs have stoked interest in the broader residential sector. The rise in demand combines with lower number of properties listed for sale and results in increase house prices.
Increased savings helping home deposits
The ‘typical home buyer’ were largely unaffected by the Covid 19 downturn, giving them more ability to save money. This have given them more ability to buy a home of their choice.
Changing household preferences
The pandemic has caused many households to contemplate their living conditions, accelerating stage-of-life decisions. The home became the office, school, gym, and cinema among other things, increasing the importance placed on space and housing in general. Spending previously channelled towards holidays and leisure has been diverted to the home. Many home owners renovated their homes or brought forward lifestyle changes e.g. A sea or tree change.
Increased appeal of a house in regional areas
The increased normality of working from home, repeated lockdowns, and limited access to many of the benefits of city living have increased the appeal of a house and regional centres. Regional areas faced less economic impact and benefit from better housing affordability. Regional growth in Australia, NZ, Canada and US has outpaced metropolitan areas.
Home Builder Grant
Australia’s HomeBuilder program is the most generous and wide ranging of the fiscal stimulus in response to the pandemic. HomeBuilder has provided a big boost to new construction. The deadline of 30 March 2021 will see the current running total of 65,000 submitted applications for new builds (mostly houses) easily surpassed.
House Price Changes and Forecast
CoreLogic announced recently that Sydney property values have recovered to be beyond their earlier 2017 peak.
Tim Lawless, CoreLogic’s Executive Research Director, says he’s not surprised that the recent strong capital gains in housing values have led another capital city to move to new record highs.
“The recovery trend in Sydney following the -15.3% decline from July 2017 to May 2019 was interrupted by COVID-19, with housing values falling by -3.0% through the worst of the pandemic.
“Since housing values found a floor in October last year, Sydney home values have risen 5.7% to reach a new record high today. The fresh record high is great news for Sydney home owners, but highlights the challenges for non-home owners looking to participate in the housing market as values rise faster than incomes,” says Mr Lawless.
Source : BIS Oxford Economics : ‘Research Briefing Australia’ Feb 21, RBA, Corelogic and Financial review.
Scott Walkom / Director Walkom Real Estate / March 26, 2021 / www.walkom.com.au