Pandemic Boosts Ownership Desire

The pandemic has accelerated the desire for home-ownership in young people, according to Mortgage Choice research.

Nearly 45% of survey respondents are more likely to purchase a home now, with a similar number feeling optimistic about achieving their home-ownership goals. The research suggests the pandemic has caused a shift in priorities, with saving money now rated as the highest priority for young people.

In order to save and buy sooner, 60% are reducing their spending, 58% are adding more to their saving accounts and 43% are applying for government grants for first-home buyers.

Mortgage Choice Chief Executive Officer Susan Mitchell Mortgage Choice says the pandemic provided a wake-up call – and ,for young people, this meant focusing their attention on their financial goals.

“Despite the challenges of getting into the property market, young people are not giving up on the Great Australian Dream. In times of uncertainty, it is human nature to want stability, and this is what investing in property can provide.”

Consumers Bullish About 2021

Most Australians think that now is a good time to
buy, with 2021 tipped to be one of the busiest years
for property ever.

Optimistic home-buying sentiment has reached a
pre-pandemic high, according to research which
found that two-thirds of Aussies believe now is a
good time to buy, up from just 42% in April 2020.

Back in April, consumer sentiment fell as Aussies
braced for a recession, but sentiment is well and truly
on the rebound. Graham Cooke, insights manager at
Finder, says the recent uptick in buyer confidence is
a good sign for the economy.

“This rebound in buyer confidence is indicative of
increased economic activity, along with an optimistic
outlook for 2021,” he says. “Not only did Australian
governments do a better job than most at restricting
the spread of the pandemic, but federal and state
economic support measures helped prop up property
markets.

“Now we’re seeing that house values in every capital
city bar Melbourne are higher than at the same time
last year.”

Nation Faces Record Rent Increases

The next several years “will produce the biggest
increase in rents that Australia has seen”, according to
real estate analyst Simon Pressley.

Pressley, Propertyology’s head of research, is
forecasting 2021 and beyond will see record increases
in rents, thanks to a housing shortage. With house
price growth expected to reach up to 15%, Pressley
says many locations could see rents rise by $2,000 to
$5,000 per annum.

“The reality is that Australia does not have enough
housing supply for its population,” he says. Five out of
eight capital cities, plus many regional centres, have a
vacancy rate below 1%.

While Sydney and Melbourne have a surplus of rental
stock and are witnessing declining rents, other
locations across Australia tell a different story.

Sydney and Melbourne’s combined population of 10.5
million people have 53,500 dwellings for rent to choose
from. The remaining 15.1 million Australians who live
in smaller capital cities and regional areas have the
choice of only 20,600 dwellings.

Loan Deferrals Dropping Steadily

New figures show that households and small to medium enterprises (SMEs) are steadily moving back to making repayments on their loans after using pandemic emergency measures to defer them.

The Australian Prudential Regulation Authority says only 2.3% of housing and SME loans were subject to repayment deferral at the end of November. At the height of the pandemic crisis the figure was over 10%.

Deferrals peaked in May at more than 12% of all housing loans but stood at only 2.8% by the end of November.

Even more remarkable have been SME loans: in May SME deferrals peaked at 17.5% of loans but have improved markedly since September to only 2.4% by the end of November.

Those figures were accompanied by a jump in housing approvals since June of 40%, with total approvals at 17,205 in November and figures for the year totalling almost 170,000.

“Who would have thought just a few months ago that we’d see figures at that level,” says independent economist Saul Eslake.

Home Prices Tipped To Rise: Survey

Almost half of homeowners expect their property value to shoot up in 2021, while pent up demand will “wash through” property markets.

A survey by ME Bank finds that 46% of owner-occupiers expect the value of their dwelling to increase during 2021, while only 5% expect decline.

The survey shows a significant shift from six months prior, when only 22% expected dwelling prices to rise and 25% expected them to decline.

ME Bank’s head of home loans Andrew Bartolo says that buyer activity is expected to rise year-on-year, after many buyers and sellers were “waiting to see” in 2020 before making any decisions. “Pent up demand will wash through early 2021,” he says. “More investors will re-emerge in 2021 in search of income and capital growth.”

REIA president Adrian Kelly says housing markets recorded respectable growth over 2020 and with limited stock and strong demand, 2021 should see further price increases.

Rate Apathy Costs Consumers

Home-owners rank paying off their mortgage as their greatest life priority, yet over 50% don’t know the interest rate on their home loan.

Research commissioned by Mortgage Choice finds a disconnect between the increased financial concerns borrowers are experiencing from the pandemic and knowledge of whether their interest rate is competitive.

Only 46% of respondents know their current interest rate. Mortgage interest rate apathy appears to be increasing, with fewer Australians knowing their rate in 2020 compared to previous surveys (61% in 2018 and 71% in 2016).

This comes at a time when the pandemic has put more people under financial pressure. Over 62% of Australians say the pandemic has caused them to worry more about money, with 66% trying to save more, spend less and improve their financial knowledge.

Mortgage Choice CEO Susan Mitchell says: “It’s so important to know your interest rate because the chances that you are paying too much are extremely high.”

Double-Digit Growth Forecast

Property prices are predicted to rise by 10% or more in most capital cities this year, as smaller cities outpace Sydney and Melbourne.

CoreLogic’s latest house price data shows that all cities except Melbourne, as well as most regional markets, recorded solid to strong growth in 2020. This momentum is expected to continue into the New Year.

AMP chief economist Shane Oliver says the current growth trends will continue through the first half of 2021.

“I see gains in prices propelled by low interest rates, government incentives and easy lending standards,” Oliver says. “But that masks a huge divergence, with suburban houses doing better than units in inner-city areas, and lagging cities like Perth playing catch-up.”

SQM Research expects house prices to rise the most in Perth (12%) and Adelaide (10%). Sydney could rise by 7% to 10%, Melbourne between 2% and 6%, and Brisbane 4% to 8%.

SQM managing director Louis Christopher says investors, who were largely absent in 2020, will be more evident this year.

It’s The Time Of the FHB

Last year saw what Domain has described as “the biggest entry-level property buying spree in a decade”, with 2020 becoming the year of the first-home buyer.

Rising dwelling prices early in the year discouraged many, says domain.com.au, but a raft of government incentives meant FHBs entered the market at the highest levels since 2008. It’s been an opportunity for those who kept their jobs to snap up their first home in the absence of investor competition.

The year started with the First Home Loan Deposit Scheme, with the Federal Government offering 10,000 FHBs the opportunity to buy with a 5% deposit, without paying mortgage insurance.

The first 3,000 spots with the major banks were taken in 10 days, with the other 7,000 spots with 25 smaller lenders gone by May. A further 10,000 places were offered in July, with fewer than 200 left by December. Then came HomeBuilder, which could be accessed on top of existing FHB grants and stamp duty concessions.

Regions Outperform Big Cities

Regional property markets across Australia out-performed the capital cities on price growth in 2020 – and by a considerable margin.

CoreLogic data shows that the result for the Combined Regions was a rise of 7% for houses and 6% for units, compared to 2.6% and 0.2% for the Combined Capital Cities.

House prices rose 12% in Regional Tasmania (compared to 7.7% in Hobart), 8.8% in Regional NSW (compared to 4% in Sydney), 7.8% in Regional South Australia (compared to 6% in Adelaide), 7.3% in Regional Queensland (compared to 4.6% in Brisbane) and 5.5% in Regional Victoria (compared to a 2% decline in Melbourne).

Unit markets also did well in the regions, with price increases headed by South Australia (up 11.7%) and Tasmania (up 10.5%). NSW, Victoria and Queensland all recorded unit price rises between 5.5% and 6.5% in the regional areas.

The only regional market to record price decline was Western Australia, which dropped both for houses and for units.

Prices Rose In 7 Cities In 2020

Seven of the eight capital cities delivered growth in their house prices during 2020, according to the latest data from CoreLogic.

The price increases were highest in Darwin, which grew 12% last year, followed by Canberra’s 8.5%, Hobart’s 7.7% and Adelaide’s 6%. Melbourne was the only city to record a decline in its median house price, down 2% in 2020.

Sydney (up 4%), Brisbane (4.6%) and Perth (2%) all recorded moderate growth in their house prices, in a year when most of the nation’s cities defied the pandemic and its negative economic impacts.

The average growth figure for the combined capitals was reported by CoreLogic as 2.6%, a number that seems unreasonably low given that six of the eight cities had growth considerably higher than that.

Apartment markets did not fare as well as houses, with four cities delivering price growth, two recording no change and two (Brisbane and Sydney) having small declines in their median unit prices. The combined cities average was a rise of 0.2% in 2020.