Australia’s property market is set for a big year with price growth to accelerate sharply, according to a leading economist who predicts the number of $3 million suburbs will again double.
Releasing the REA Insights Property Outlook Report 2021, realestate.com.au chief economist Nerida Conisbee said 2021 is looking like a bumper year for price growth as positive momentum continues.
“Property’s back and it will be a boom year in 2021,” Ms Conisbee said.
Ms Conisbee predicted there will be a sharp acceleration in pricing driven by record savings rates and cheap and easy finance.
“The Australian economy is no longer in recession, a vaccine is now available, interest rates are at record lows and access to finance continues to ease,” Ms Conisbee said.
“There has been an incredible lift in the household savings rate and there’s also been an incredible lift in household wealth.
“All of those factors are combining for a really massive year.”
Ms Conisbee noted that conditions started to look quite strong after November, particularly as Victoria came out of its extended lockdown.
There were fears that prices could plummet during the coronavirus pandemic and recession, but despite some initial periods of price decline in some markets, house and unit prices mostly rose across Australia during 2020.
Property prices also grew in the majority of Australian suburbs in 2020.
A number of economists have forecast strong growth in prices over the next two years. Westpac economists on Monday said the housing market is moving into a sustained boom, predicting dwelling prices will rise by 20% in total over 2021 and 2022.
The luxury residential market enjoyed particularly strong conditions in 2020, as people saved more and total household wealth hit a record high.
The Property Outlook Report noted that towards the end of 2020, views per listing on realestate.com.au for homes priced over $10 million had increased by 150% compared to before the pandemic.
The number of suburbs with medians priced over $3 million more than doubled during the pandemic and more than half of the 30 suburbs on the list experienced double-digit price growth.
Almost all are located in Sydney, although Canberra gained its first entry on the list in Forrest.
Ms Conisbee said the number of $3 million-plus suburbs is set to double again – to 60 – during 2021, primarily because much stronger conditions are expected for the residential market.
Ms Conisbee said the majority of suburbs will still be in Sydney, but potential contenders in other states include Mont Albert, Portsea, Brighton, Flinders and St Kilda West in Melbourne.
She said Main Beach could become the Gold Coast’s first $3 million-plus suburb and Newcastle’s Bar Beach is also a contender, which would be an achievement for a regional area.
“We’re starting to see this real movement away from just purely Sydney suburbs plus Toorak [in Melbourne], to having these regional places pick up in terms of value to that level.”
At the same time, more suburbs will crack the $1 million and $2 million median house price barriers during 2021.
“We’re in a boom year so there’s going to be a lot of records set, whether you’re looking at $1 million, $2 million or $3 million, whether you’re looking at price growth – whatever metric you’re looking at, it’s going to be a very strong year,” Ms Conisbee said.
Ms Conisbee predicted regional property markets will continue to outperform capital cities, as the health crisis accelerates interest in regional living amid demand for more space and changes in work patterns.
There has been strong demand for beachside and lifestyle locations in regional Australia, while the inability to travel overseas due to closed international borders is also driving more people to buy a holiday home.
Ms Conisbee said a lifestyle change was one factor driving the record exodus of people from capital cities to regional areas, although the mining sector’s bumper year was a significant driver particularly in Western Australia.
“Interest in regional Australia doesn’t seem to be waning,” Ms Conisbee said.
“We continue to see a trend for regional property in search activity on realestate.com.au, and price growth has been far higher in regional areas compared to capital cities,” she said.
First-home buyers dominated the market in 2020, while investor activity was low.
First-home buyer enquiry was up 62% on realestate.com.au, in sharp contrast with investor enquiry which fell 5%.
Ms Conisbee said first-home buyer activity will moderate during 2021, but remain a strong market.
“Prices are moving quickly, investors are coming back and any incentives available to first-home buyers are likely to be eased,” she noted.
Ms Conisbee said the recovery in investor enquiry in the final quarter of 2020 is set to extend into 2021.
“Importantly, larger markets such as Melbourne and Sydney are no longer seeing declines in activity,” she said.
Ms Conisbee said the return of investors was good news for apartment markets, although it would take time to get investors back to high-volume development areas.
Ms Conisbee said the rental market outlook was more positive in 2021 than it was in 2020, primarily because employment conditions were improving.
“While a rental market recovery is imminent, the rebound for inner Melbourne will be slow,” she said.
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