Pandemic Changes House Price Trends

Regional property markets continue to lead, with new figures revealing nine of the top ten areas for price growth in the past year are in regional centres.

PropTrack’s 10-year growth tracker reveals the ongoing shift to regional towns has pushed up prices in many of Australia’s country and coastal suburbs. The only metro area to make the top 10 list was Sydney, which came in 10th for property price growth.

PropTrack director of economic research Cameron Kusher says the increase in regional property prices started some years ago.

“But the flexible work arrangements predicated by Covid, and people reassessing their lifestyle due to the pandemic, have accelerated the shift of people out of capital cities,” he says.

“It isn’t just a shift permanently out of the capital city, but people also seeking second homes and investment properties in these lifestyle markets that have all contributed to the rapid increases in prices.”

PropTrack’s data shows nationally prices have increased 89% in the past decade on average.

Average Borrower Is 45mths Ahead

Australians have paid an additional $50 billion in mortgage payments during the Covid pandemic, with some more than three years ahead of their repayments.

Low interest rates and reduced spending because of the closed international borders and lockdowns, means many Australians have parked their extra cash in their home loans.

APRA data shows that by the end of 2021 the average homeowner was 45 months in advance. That’s a big step up from the start of 2020 when homeowners were 32 months ahead.

Market Economics managing director Stephen Koukoulas says the pandemic changed spending habits.

“The pandemic changed a lot of things, we did tend to stay at home, didn’t get to spend our money on luxurious things like holidays,” Koukoulas says. “A lot of people decided to take advantage to pay down their mortgage.”

He says many have reduced the time to pay off their mortgages by six or seven years and have a good buffer when interest rates do rise.

Banks Offer Faster Loan Approvals

Home lenders continue to fight for dominance, with faster approvals their latest tool to entice borrowers. Big banks such as ANZ have revealed they want to reduce waiting times for approvals so that they can
keep up with demand.

Along with quick approvals lenders are continuing to offer cashback deals with 25 banks and lenders offering mortgage customers incentives to shift their home loan over, according to analysis by RateCity.

They are offering the sweeteners at the same time as a number of banks have started to lift fixed interest rates. ANZ has lifted rates on fixed-rate mortgage three times in the past three months.

According to Lendi Group chief executive David Hyman, the median variable interest rate secured by customers for loans settled on its platform in the past two months was 2.31%. He says approval times have fluctuated significantly in the past two years and that’s something banks have to improve.

“Many lenders have been working hard to improve their service level agreements because the customer experience is just as important as price,” Hyman says.

300+ Suburbs Hit $1mil Median

An additional 311 Australian suburbs now have median house prices of $1 million or more, with Sydney and regional NSW accounting for the largest number of new entrants.

CoreLogic data shows that between May and December 2021, 38% more suburbs recorded a median price of $1 million or more.
In all, 77 suburbs in the Sydney region joined the list, with the majority of the new entrants on the Central Coast. There are now 417 Sydney suburbs with million-dollar-plus medians.

Brisbane recorded 40 new entrants, taking its total to 91, while Regional Queensland added 36 suburbs to reach a total of 82. Brisbane suburbs included Sandgate, Shorncliffe, Nundah, Kedron, Sunnybank, Annerley and Enoggera.

An additional 37 suburbs were added to Melbourne lifting its total to 221, while Adelaide added 25 suburbs to 70 and the ACT recorded 18 new additions to reach 45. Perth added 10 new suburbs to bring its total to 52 and Hobart added two new entrants to hit seven.

Vendors Make $27bil In Profits

The number of properties selling for a higher price than the owners originally paid has increased, with new figures revealing 92.4% of sellers are turning a profit.

The latest CoreLogic Pain and Gain report reveals profit-making sales, at the end of 2021, increased 50 basis points on the June Quarter. The result was the highest level of profitability recorded in more than a decade, with total resale profits hitting $27.3 billion.

The report coincides with the latest housing finance data from the ABS which shows the value of investor lending reached record levels at the end of last year.

CoreLogic head of research Eliza Owen says the figures show that property investors throughout Australia are looking at a median profit of $270,000 when they sell.

According to Maree Kilroy of BIS Oxford Economics, property prices are on the increase as investors can’t see similar opportunities in other areas such as cash and bonds.

Rental Scarcity Tough On Tenants

Landlords are tipped to reap the rewards of continued tight vacancy rates throughout Australia in 2022.

Domain’s monthly Rental Vacancy Rate report reveals the number of properties available for rent increased slightly in December but it remains incredibly low. The national vacancy rate is down from 2.4% in November 2020 to 1.7% (3% is considered a balanced market).

With January considered a busy time for renting, Domain chief of research Nicola Powell says vacancy rates will continue to decline.

“It means that in some areas of Australia, particularly the smaller markets, it will be well-nigh impossible to find a home to rent in 2022,” she says.

The number of properties available for rent dropped to just 37,000 in December 2021 – 31% down on the same time 12 months earlier. Hobart has the tightest vacancy rate of 0.3%, followed by Adelaide, 0.4%, Perth, 0.6%, Canberra, 1%, Brisbane 1.3% and Darwin 1.3%.

Dream Of Ownership Still Alive

The Great Australian Dream of home ownership is alive and well with a new survey revealing it is one of the most common New Year’s resolutions for 2022.

Prices may have taken off in 2021 but plenty of Aussies still want to get their foot on the property ladder, according to financial comparison site

Its survey found many participants made a New Year’s resolution centred around money, with 21% wanting to buy a home as the second most popular resolution. The most popular resolution of the 2,124 participants surveyed was to save money.

The third most popular resolution was to buy an investment property, with 10% of participants saying this was their major goal for 2022.

Canstar finance expert Steve Mickenbecker says the results show that not even high property prices can dampen the Australian obsession with property.

Spending Increases As Lockdowns Fade

While 2021 may have been the year of saving, Australians did start to loosen the purse strings a little by the end of the year. Lending for mortgages hit
record levels in November while credit card lending also increased, according to the latest APRA data.

Home loans to owner occupiers increased by $11.2 billion while lending to investors rose by $2 billion. At the same time credit card lending rose by 6.3% ($1.7 billion) in November.

APRA says it is watching carefully as debt-to-income ratios rise but says it won’t implement any new measures to cool lending until it gauges the effect of its move late last year to increase the interest rate buffer.

ANZ lending to owner occupiers dropped 0.44% to $1.74 billion between November 2020 and 2021. But Macquarie owner-occupier mortgages increased to $447 million compared with the same month in 2020, while CBA wrote $3.33 billion in new owneroccupier mortgages and Westpac $2.54 billion.

House Prices Outpace Wages Growth

The real growth in wealth in Australia in 2021 has been in house prices, which are now ten times higher than the average wage.

While increased price growth is good news for property owners, it’s not so rosy for first-home buyers trying to save a deposit.

REA Group PropTrack analysis of Australian Bureau of Statistics data shows average annual earnings in Australia are $69,862 while the median house price in capital cities is $771,000 – 1,104% higher than wages (although the median price in the regions is $540,000).

PropTrack economist Anne Flaherty claims it’s now nearly impossible for a single-income household on an average income to buy a home.

“For the single-person household, that ability to save a deposit has just become incredibly difficult without looking to the bank of mum and dad, for example,” Flaherty says.

The increase of the buffer rate at which mortgages are assessed (to 3% above the current mortgage rate) is also keeping some out of the market.

2021 Made Us Wealthier Than Ever

Australians became richer than ever in 2021 with household wealth increasing by 20% despite the Covid impacts.

Household net wealth rose to its highest ever level in 2021 mainly as a result of an improved stock market, growing property prices and lockdowns reducing household spending.

Plenty of records were broken in 2021. Employment-to-population ratios climbed to 63% – the highest since records began – while unemployment fell to 4.3% in November, the lowest rate since the peak of the mining boom in 2008. All indications are that unemployment figures will continue to tighten in 2022.

Farmers in some regions are having their best year on the land in decades with the total value of agricultural production set to hit $78 billion with wheat, cotton, wool and cattle prices all up.

The number of business registrations in Australia also grew by 30% while wages are on the way up as economic growth is expected to grow at a faster pace than it has in 25 years.