Australia’s property market exceeded all expectations in 2020 and the first half of 2021, as a the suggestion of potential market crash was swiftly switched out to reports of a nationwide market boom.
PRD has released its Australia Economic and Property Report for 2021, which analyses how the property market has evolved over the past year due to multiple factors, including industry and societal shifts amid the pandemic.
PRD chief economist Dr Diaswati Mardiasmo noted the current state of the property market boom has both advantages and disadvantages for the Australian public.
“The property market returned stronger than before once restrictions eased and employment started to recover, mostly due to built up household income and pent-up demand,” she said.
“However, there is another side to this – property prices have broken records which has led to Australians taking on higher debts and an inflation of lower-end priced homes.”
The easing of restrictions saw demand unleashed as the property market proved itself to be more resilient than the stock market.
Real estate agents around Australia started to report double-digit inquiry numbers and increases in transaction values, according to PRD.
Property growth
Despite property market crash predictions, the real estate industry was able to quickly adopt to adopt new technologies as restrictions eased in order to allow buying and selling to continue.
Taking into consideration many capital cities’ rollercoaster year, the metro market proved its resilience overall.
City markets recorded an average of 7.6 per cent median house price growth in the 12 months to the first half of 2021, according to PRD.
This was much higher compared to the one per cent average recorded in the 12 months to the first half of 2020.
Darwin grew the most by 23.4 per cent, followed by Brisbane at 11.6 per cent, Adelaide at 11.2 per cent and Sydney at 4.9 per cent.
Of course, due to Melbourne’s numerous lockdowns, the Victorian capital saw a drop in market growth, falling 8.1 per cent.
During the height of COVID-19, non-capital metro markets recorded an average of 2.7 per cent median house price growth in the 12 months to the first half of 2020.
It grew by an average of 10.4 per cent in the 12 months to the first half of 2021, the strongest yet, with buyers moving outside of the capital cities due to remote working conditions.
Regional markets soared, recording an average of 12.7 per cent median house price growth in the 12 months to the first half of 2021, outpacing all other markets.
It was the highest average median house price growth recorded by PRD since the first half of 2019, which was reflective of high demand in regional areas.
Regional Victoria (19.1 per cent), Western Australia (17.4 per cent), and NSW (15.5 per cent) led in these markets.
PRD Managing Director Todd Hadley noted the shift was due to affordable prices, a less reliant economy on international trade, higher rental yields, increasing investment in infrastructure and first home buyers being able to access multiple grants to build their homes.
“The market has performed extraordinarily, and PRD’s latest report shows how government stimulus and historically low home loan rates played a key role to this success,” Mr Hadley said.
Dr Mardiasmo agreed there was “no doubt” the real estate industry was working with a vastly different property market compared to 12 months ago.
“At present, local Australian buyers are still sheltered from the usual international demand as our borders remain closed. Now is the most affordable and advantageous time for first home buyers, especially as many banks and lenders are signalling an increase in their interest rates”, Dr Mardiasmo said.
Rental market and the housing supply crisis
The imbalance in rental supply and demand can be distinctly seen in rental vacancy rate patterns, with many capital cities seeing a significant decline since the height of COVID-19 in April 2020.
According to PRD, Adelaide, Perth and Canberra recorded below 1 per cent vacancy rates in the March quarter of 2021, at 0.7 per cent, 0.9 per cent, and 0.9 per cent respectively.
Brisbane’s oversupply concerns were vanquished, with a strong decline to 1.7 per cent.
However, Sydney and Melbourne saw vacancy rates increase to 3.6 per cent and 6.1 per cent respectively.
In particular, Queensland saw a significant population shift, which greatly impacted supply.
The population grew by 1.3 per cent to the December quarter of 2020, according to PRD, with an additional 9763 people moving to the state.
PRD noted the increase in interstate migration was likely due to less restrictive COVID-19 conditions, lower property prices compared to NSW (50 per cent) and Victoria (30 per cent) and more affordable living costs.
However, prices have since risen considerably as more interstate residents look to purchase in Queensland.
Is it the right time to buy?
PRD’s Time to Buy a Dwelling Index showed some interesting trends since March 2020, with more fluctuating movements than before.
The index increased from June 2020 once general COVID-19 restrictions were eased, with many re-allocating their funds towards the property market.
Sentiment continued to increase, reaching its peak in December 2020 as the government introduced more housing grants and employment levels started to recover.
However, with the increase in demand, imbalanced by supply, and the increase in prices, it seems Australians are re-thinking their decision.
The Time to Buy a Dwelling Index has since declined on average by 5.5 per cent in the 12 months from June 2020.
NSW and QLD are the only two states that have recorded increases of 2.2 per cent and 5 per cent respectively.
This can be attributed to NSW’s resilience and QLD’s relative affordability and the fact they have been able to keep the economy moving, relatively normally, compared to other states.
