cont.

11. MORTGAGE FREEZES – WARMING BACK UP

Around 250,000 mortgage holders will have their repayments on hold and will need to start making repayments or sell. This may result in a slight increase in listings depending on how they can manage making repayments again and whether they have tenants in their investment properties. With interest rates at all-time lows, the cost to hold couldn’t be much better, but only time will tell how influential this will be.

 

12. POPULATION / MIGRATION / BUILDING APPROVALS

In 2019, some 240,000 people migrated to Australia. That equated to new demand for about 92,000 dwellings. However, total population growth is now expected to rise just 0.2 per cent for FY21 and 0.4 percent for FY22, the lowest since World War II.

While this is occurring, building completions remain high, even while construction slows. For 2020 we expect about 170,000 dwelling completions. That covers new demand from some 442,000 people. The problem is Australia’s population will only expand in 2020 by some 90,000 people, meaning vacancy rates will very likely rise in 2021.

The rolling out of the vaccine and immigration coming back will be key influences on how significant this one is.

(SQM Research)

 

13. RENTAL MORATORIUMS EXPIRING MARCH 2021

Landlords have been unable to evict tenants, increase rents and in some cases, have been forced to discount rents for financially impacted tenants. One off payments from governments to landlords for tenants experiencing hardship have also taken place in Victoria but they have often fallen short of the lost rent.

Why is this a problem?

It’s very hard to sell a tenanted property. The property rarely presents well and access for open homes can be difficult to coordinate. Plus, with a lease in place, it’s often only suitable for investors who are generally price conscious and looking for ‘bargains’.

Expect an increase in listings, albeit of more ‘average’ quality properties, more so than blue chip homes and higher demand middle ring suburbs.

 

14. OWNER OCCUPIERS SEEKING THE IDEAL FAMILY HOME

The data show us owner occupiers are driving the market and the importance of the family home has never been more evident. Working from home means many need to upgrade, renovate, or consider moving further out to find space. And of course, investors are the first to retreat when the media storm says the market will crash. Now that this has passed and sentiment is good, we expect investors to come back strong and give the property market a push in a positive direction.

15. PHASING OUT OF JOB KEEPER/SEEKER

According to the RBA, JobKeeper saved 700,000 jobs during 2020. They payments reduced in September and will do so again in January 2021. This tapering of support has created a soft landing and with economic recovery expected to be strong, will hopefully have a minimal impact on property.

Of course, some tenants will struggle to make rental payments and vacancies may rise in areas of high part-time employment (think inner city), however, we don’t expect a rise in listings from this.

 

16. ECONOMIC PREDICTIONS STRONGER THAN EXPECTED

The engineered recession ended up being relatively short lived. Even the Commonwealth Bank of Australia economists upgraded their economic outlook, noting “there are genuine reasons to believe the domestic economic recovery is going to be strong over the next two years”.

“An unprecedented level of fiscal and monetary policy stimulus coupled with an expected drawdown in accumulated savings and the further easing of COVID‑related restrictions will support economic growth and job creation,” CBA economist Gareth Aird said.

The bank tips the economy to shrink 3.3 per cent in 2020, followed by a rebound in GDP of 4.2 per cent in 2021 and 3.8 per cent in 2022. This says a lot coming from one of the more pessimistic banks during the pandemic throughout 2020.

 

Time and time again, property in Australia has proven to be a resilient asset class in which to invest. As always, if you are considering a purchase, make sure it’s an informed one.