Australia is on the “cusp of a housing boom”, according to the Commonwealth Bank, which has forecast house prices will rise 16% over the next two years.
An economics issues paper by the bank’s head of Australian economics, Gareth Aird, predicts national house prices would rise 9% in 2021 and a further 7% in 2022. The other major banks have also predicted big price rises this year and next.
While Sydney (7.5%) and Melbourne (7%) are tipped to rise moderately, price growth outside of the two largest capitals is expected to really climb. Darwin is predicted to rise 12% this year, Perth 10%, Brisbane 9.5% and Hobart, Adelaide and Canberra all 9%.
It’s a marked turnaround from the dire predictions made during the pandemic’s early days last year, which Aird admitted had taken many in the industry by surprise. “The negative impact that COVID-19 had on Australian property prices turned out to be much more muted than almost any forecaster expected, us included,” he says.
Vacancy rates in our already-tight rental markets fell in six of the capital cities and were unchanged in the other two in January, according to the monthly report from SQM Research.
The national average vacancy rate fell from 2.2% in December to 2% in January, but five capital cities – Perth, Adelaide, Canberra, Darwin and Hobart – all have vacancy rates below 1%, while Brisbane sits at 1.7%. In regional Australia, many centres have vacancy rates below 1% in what represents a national rental crisis for people seeking tenancies.
The two biggest cities, where vacancies are highest, showed marked improvements in January, with Sydney falling from 3.6% in December to 3.2%, and Melbourne falling from 4.7% to 4.4%.
SQM’s Louis Christopher says the figures indicate the worse is over for landlords in Sydney and Melbourne. “The falls in those two cities, combined with the increased tightness in other cities and regions, has now brought rental vacancy rates down to below where they were prior to Covid19,” he says.
The big banks claim the planned rollback of responsible lending laws will help customers, saying it will lead to faster loan approvals by cutting the amount of detail consumers must provide on their living expenses.
The Federal Government is proposing changes that would mean banks are no longer subject to responsible lending obligations. It says it will make it faster for consumers to access credit, while borrowers will still be protected through other regulations on banks and redress schemes.
Commonwealth Bank, Westpac and National Australia Bank have backed the changes, saying they will remove barriers to credit.
NAB says it will continue to assess if customers can repay their loans without falling into hardship. It says lending currently is being slowed down by requirements for banks to collect too much information about customers’ living expenses.
CBA says banks are currently asking for information that customers find “burdensome” to provide, but the data does not provide a useful guide on a customer’s ability to repay a loan.
More signs are pointing to higher prices across Australia’s super-tight housing market this year as the stampede to snap up properties continues.
CoreLogic auctions data released on Monday shows a preliminary clearance rate of 84% across the combined capital cities last week, up from 81% the previous week. More homes went under the hammer, with 1,287 auctions compared with 884 the week prior.
Sydney was a standout performer, with a clearance rate of 89%, compared to 77% a year ago. In Geelong and Sydney’s inner west, every single property that went to auction was sold, the preliminary figures showed. Other strong sub-regions included NSW’s Central Coast and Sydney’s Northern Beaches.
Across the smaller markets, Canberra returned the highest preliminary clearance rate of 93%, followed by Adelaide 83%, Perth 75% and Brisbane 75%.
“Such strong auction results signal further upwards pressure on housing prices amidst extremely tight advertised supply levels and above average buyer demand,” CoreLogic said.
SQM Research has calculated national residential property listings decreased in January by 2.9%, falling from 272,999 in December to 265,116.
Compared to 12 months ago, listings were down by 10.5%, which is putting upward pressure on prices, given high buyer demand.
All capital cities experienced seasonal decreases in property listings over the month except for Perth. The largest decrease was 4.7% in Melbourne.
Year-on-year listings also show larger declines for most capital cities with the exception of Sydney (up 4.5%) and Melbourne (up 21%). Nationally, new listings decreased by 24% over the course of January with 16,234 fewer properties on the market.
Hobart’s new listings decreased 33%, followed by Canberra which dropped 26%. Sydney recorded the lowest decrease in new listings of 2%.
The month of January traditionally records falls in properties listed for sale as the market is still in holiday mode, SQM’s Louis Christopher says.
RBA governor Phillip Lowe has said the Reserve Bank is not responsible for targeting house prices, after questions were raised about the creation of a boom market against the backdrop of low interest rates.
“The RBA does not, and should not, target housing prices – instead, our focus is on the lending that is used to purchase housing,” Phillip Lowe said in front of parliament’s standing committee on economics.
Questioned about the point at which the RBA will act to prevent the creation of “unsustainable prices”, Lowe said the issue for the central bank would be if people didn’t borrow sensibly.
“We shouldn’t try to control asset prices,” he said. “What we can influence is how much borrowing happens on the back of those rising prices. We would be concerned if there were to be a deterioration in these standards, but there are few signs of this at the moment.”
Last week, the RBA confirmed that it will keep the cash rate at 0.1% and revealed that the interest rate will likely remain at a record low until 2024 at least.
Australian capital cities have witnessed the biggest loss of people into the regions on record.
The ABS has confirmed the Exodus to Affordable Lifestyle trend with the release of quarterly figures showing the movement of people around Australia.
Economists are calling the escape to the regions a “stampede” and overwhelmed real estate agents are calling the demand on regional properties a boom. CoreLogic data shows regional home prices, on average, rose 8% over the year to January – the biggest jump in 16 years.
The ABS data shows capital cities saw their biggest quarterly loss of people from internal migration on record, with 11,247 people leaving capital cities and moving to regional areas.
Sydney had a net loss of 4,700 people to the rest of the state, building on the 3,700 from the previous quarter. Melbourne also had a net loss of 4,700 people to the rest of the state. Brisbane went against the trend with a net gain of 230 people from the rest of the state, while Perth had a net gain of 710.
New ABS data on housing finance shows investors are returning to the market, while home buyer activity remains strong.
The value of new owner-occupier home loans rose 8.7% to $19.9 billion in December, to be 39% higher than December 2019. The value of loans to investors rose 8.2% to $6 billion.
ABS head of Finance and Wealth, Amanda Seneviratne, says: “Loan commitments for existing dwellings accounted for 53% of December’s rise in owner-occupier housing loan commitments, while construction of new dwellings accounted for 32%.”
The value of construction loan commitments grew 17% in December, more than doubling since the June implementation of the HomeBuilder grant.
“Federal and state government measures, such as HomeBuilder, are supporting ongoing growth in housing loans”, she says.
In December, the number of first-home-buyer loans rose 9.3% to reach 15,205, a 56.6% rise since December 2019. This is the highest level since June 2009, when similar rapid growth was spurred by the tripling of the FHB grant, in response to the global financial crisis.
Australia’s “ferocious” property market is forecast to rise 10% this year, following new data that shows house prices and new loan commitments have hit record highs.
NAB group chief economist Alan Oster expects prices to rise 10% in most capitals, excluding Sydney and Melbourne, which would rise 7% or 7.5%.
Commonwealth Bank head of Economics Gareth Aird has predicted a 9% rise in house prices. “There’s a lot of evidence showing the housing market is strong and the pricing data fits in with the lending data,” says Aird. “We’re suggesting house prices will keep rising in 2021.”
It’s a big turnaround from forecasts made by the banks in the early days of the pandemic, when it was thought prices could fall anywhere from 10% to 30%. Instead, housing markets in most parts of Australia continued to deliver growth.
Buyer advocate Cate Bakos says the market for buyers has become “ferocious” with house prices rising by thousands of dollars each week due to the strong competition over fewer homes for sale.