You may remember back in June when we talked about the flip flopping media headlines that reported the market was tanking, yet booming, on account of the (then) novel coronavirus. It appears now the doomsday forecasters have revised their position for the residential market and, unsurprisingly, it’s not nearly as bad as reported – it’s actually better.
At the time, most major banks and research firms speculated a widely reported 10-30 per cent drop in house values which was largely dependent on the, unknown at the time, nature of government stimulus offered. The other driver was speculation around the country struggling through multiple waves of the virus and rolling lockdowns.
So, it may come as a surprise to learn that across the eight capital cities, home values have declined only 2.5 per cent since their peak in April 2020.
In the last two weeks, as the Sydney and Brisbane markets reported positive signs, the sentiment from banks and property experts has now changed.
So, what’s driving this shift in opinion?
Positive influences – financial
- Interest rates continue to remain at an historical low and banks are even dropping rates outside the RBA cycle. In fact, CBA has predicted a 6 per cent annualised increase in property values over the second half of 2021 stating the radical improvements in purchasing power will become the “dominant driver of dwelling prices.”
- Government stimulus packages at the Federal and State level for businesses, families and individuals are being extended, averting economic decline.
- State and Federal legislation for tenants, landlords and homeowners have been introduced to ensure property is occupied and retained by renters and mortgagees and payment obligations can be met.
Positive influences – behavioural
- With fewer opportunities to spend disposable income on activities like travel, dining and entertainment, those who are working are saving more money than ever.
- Working from home means more time inside and with that comes the desire for more space. As we have previously predicted, working from home arrangements will drive transactions for ‘upsizers’, sea and tree changers.
- Expats are coming back to Australia and for many, this is a permanent move. Others see Australia as a safe and prosperous alternative for temporary or even permanent migration once border restrictions lift. Imagine how life in Sydney, Brisbane or Perth looks to someone in Mumbai, Hong Kong or New York right now?
Owing to favourable lending conditions and the resilience of the Australian property market – not to mention the financial instruments used by the RBA to maintain positive loan ratings (a topic for a future blog) – we expect the market to remain steady with moderate increases over 2021 as sentiment improves and buyers are encouraged to seek it as a safe haven for investment.
Across the eight capital cities, home values have declined only 2.5 per cent since their peak in April 2020. The previous doomsday sentiment from banks and property experts has now changed.