Residential Market Predictions

After almost a full year of uncertainty, its no question as to why predictions about the regional and national residential property markets are being watched so closely. As a year that was set up to be a great year for the Australian housing market, 2020 took a turn for the worse. The instability brought about by the COVID-19 pandemic halted any possible growth in its tracks and undid all the progress the market experienced in the early weeks of the year. Fast forward to March 2021 and the market is now accelerating at the fastest pace in decades.

The saving grace to stabilising the market as much as we have managed to thus far is attributed almost completely to the influx of funding that has been pumped into the industry by the Reserve Bank of Australia. Since the announcements related to additional funding, reductions in borrowing costs, the RBA reconfirming that they intend to keep interest rates on hold for the long term and additional government incentives being introduced, the residential property market has not only stabilised but swung to aggressive price growth.

Despite these market stimulating factors, home buyers are shrugging off ongoing uncertainty surrounding employment, debt-servicing income levels, and further possible COVID-19 outbreaks. We are in a better position now than we were during the early days of this pandemic, but where do we go from here? Institutions, specialists, and experts across the industry have all been making their predictions on what the next 12 months will look like for market growth – or decline.

In around August of last year, ANZ economists went on the record to predict that there would be a 10% decline in prices this calendar year. Before the year’s conclusion, they revoked this prediction and amended it to forecast a 1.7% gain instead. A mere few months later and the overall tone of predictions are vastly different to those that emerged at the end of 2020.

Upper echelon economists, such as those from NAB and Commonwealth Bank, have made predictions for an overall market increase in the realm of up to 10% by the end of 2021. To date, evidence has emerged around pricing and lending data that support these predictions. The increases in housing prices have recovered at a consistent rate, with Melbourne’s house price median ending last year at $936,073, according to the Domain House Price Report.

Comparatively, there have been some concerns regarding the stability of this incline. While there is the obvious concern that there will be another COVID-19 outbreak that will cause another downturn, some believe that the consequences of some of the policies and decisions implemented last year will be the catalyst. Particularly, what will happen when those with deferred-payment loans are required to start paying again.

Economists, however, believe that with the appropriate management, these concerns will have a minimal effect on housing prices and that they can easily be mitigated. At Hub, we feel that suggestions for reform in lending and regulatory intervention to slow down the speed of the market may be a little premature.

With these concerns in mind, Hub maintains that 2021 will likely see a significant increasing housing market prices of around or upwards of the predictions made by economists thus far. We believe that the prediction of a 10% increase may even be conservative due to the lack of housing supply coming to the market, the return of ex-pats from abroad, improvements in the lending environment and the real likelihood that there will be a realistic solution to increasing immigration before the end of the year.

If you would like to discuss or receive advice on the current state and future predictions of the residential property market, please reach out and contact Michael Hermans at michael@hubpg.com.au.