Anyone that has been keeping an eye on the Australian property market in 2020 and this year will attest to the fact that homes have, without a doubt, been exchanging hands much more than some might have predicted when COVID-19 first hit our shores. It looks to be an especially good time for homebuyers to purchase property, whilst home sellers stand to score by taking advantage of the higher-than-average demand.
Although the country did go through an initial period of shock early in 2020 after global share markets went haywire, consumer and business confidence bounced back as a result of government-issued stimulus packages and a significant drop in interest rates. The world of real estate moved online, and easily adapted to lockdown restrictions. As one-on-one appointments became the norm, room was created for quality conversations between real estate agents and prospective buyers, nudging the property market back into motion.
There are plenty of reasons for the Australian property market showing as much resilience as it currently is. Consumer information company CoreLogic’s latest Home Value Index shows that the local real estate market is showing remarkable value growth, as it has done for the past few months.
As in any other industry, supply and demand dictate whether buyers or sellers are favoured in the real estate sphere at any given moment. Australia’s capital cities have shown rises in property prices across the board, driven by a high demand of properties in the face of a smaller available supply for buyers to purchase. This seller’s market means it’s a good time to consider putting your property on the market.
While some prospective sellers might have initially wanted to ride out the storm and see how the property market performs in the face of the unique challenges it has been currently facing, it should be a heartening factor to note the biggest price gains in 32 years accumulated over the month of March 2021 – 0.4% in Melbourne and Brisbane, with Sydney and Adelaide’s property markets showing value growth of 0.5%. As for 2021 as a whole thus far, the year has seen property prices in Australia rise by no less than 7.2% – and it’s only the first quarter.
There are a number of factors driving the property market in 2021, and they aren’t all related to supply and demand or the seller’s market. Read on to learn how buyers are also benefiting from stimulus packages and regulations issued by the government, making this a great time to invest in property, too.
First homebuyer concessions
The First Home Loan Deposit Scheme (FHLDS), along with the HomeBuilder programme, have been invaluable tools to people who are looking to acquire their very first property.
Through the First Home Loan Deposit Scheme, eligible first home borrowers are supported by allowing them to purchase a property with as little as 5% deposit at their disposal. The National Housing Finance and Investment Corporation guarantees 15% of each home loan approved by 27 participating lenders, allowing people that would otherwise not be able to purchase their first home to do exactly that. The government announced that an additional 10,000 FHLDS places were reserved for the 2020-21 financial year.
The HomeBuilder programme provided up to $25,000 to eligible owner-occupiers from 4 June to 31 December 2020, allowing them to build a new home, substantially renovate an existing home, or buy an off the plan home or a new home. This programme was extended to run from 1 January until 31 March this year, this time offering a $15,000 grant to eligible recipients. This led to a 65.6% increase in the construction of new dwellings since July 2020.
During the month of February this year, the ABS Lending Indicators report showed a 48.8% increase in new loan commitments for housing over the course of the past year – a stunning rise, the likes of which has not been seen since 2009.
It stands to reason that first homebuyer concessions and other grant programmes will definitely have driven and supported the Australian property market in 2021.
The government’s consumer credit reforms, which commenced on 1 March 2021 now make it easier for individuals to access credit, requiring them to hand over less information than had previously been necessary. Easier access to credit is sure to have an influence on the amount of new homebuyers entering the market, as is likely to be seen in the coming months following the enactment of the new legislation.
Stamp duty changes
Changes to stamp duty requirements proposed by the government of New South Wales are another factor driving the property market in Australia in 2021. Also aiming to get rid of financial barriers that stand in the way of home ownership, the proposed changes would allow prospective homeowners the opportunity to choose between either paying stamp duty upfront or paying a much smaller annual property tax when purchasing a home.
Should these changes be accepted, they will certainly also open the doors of home ownership to a far greater number of people in New South Wales than might otherwise have been the case.
While proposals like this have, for the moment, only been brought in New South Wales and the Australian Capital Territory, other Australian states may also opt to phase out the challenges posed by stamp duty in the future.
Regional areas continue to increase in popularity
As COVID-19 also ushered in a move to remote work, prospective homebuyers have started thinking of trekking away from the city, leading to an increase in the popularity of regional areas. This trend has continued as the months have passed, with the latest ABS report on migration (reference period September 2020) indicating that capital cities had experienced a net loss of 11,200 people from internal migration, accounting for the largest quarterly net loss on record.
Savvy homebuyers are seeking out regional areas for their affordable properties. Comparing property prices in regional and metropolitan areas, it’s easy to see why byers would rather invest in properties that give them more for less.
As remote work continues, so will the trend toward moving to the countryside, and this is, without a doubt, one of the great drivers of the Australian property market in 2021.
Rising consumer confidence
While consumer confidence did get a bit of a shock when COVID-19 first became an issue of concern, it’s fair to say that the country’s real estate market is currently experiencing a post-pandemic boom that is unlike any that we have seen before.
The Westpac-Melbourne Institute Index of Consumer Sentiment, released in December last year, shows consumer confidence at a 10-year high – something one would not necessarily expect to see in the midst of a raging pandemic. Thanks to stimulus packages and other support measures offered by the Australian government, as well as relatively efficient management of the pandemic and an ongoing vaccine rollout to curb its spread, the country looks to be weathering the storm quite well.
As the economy recovers even further, this will almost definitely also be reflected in the Australian property market. Already a beacon and mainstay of the Australian economy, the real estate realm looks to remain a good investment opportunity – and now also one that is open to far more people entering it, thanks to legislation and assistance.
The Australian property market has been driven by a number of supporting factors in 2020 and 2021. Despite also having to contend with the onslaught of coronavirus, Australia’s real estate market has adapted to a different way of marketing and selling properties. With a great many more people now able to view properties online using immersive 3D technology, home sellers have been able to market their properties perhaps more widely than ever before. On the other hand, one-on-one property viewings have allowed buyers to have quality conversations with agents about the homes they are interested in purchasing.
Real estate agents have noted an increase in buyers that are not in two minds about investing in real estate. With more time and lenience with regard to perusing properties, the people that ultimately go to intimate property tours already have a good idea of what they’re looking for, helping to speed up the overall selling process.
First homebuyer concessions and other initiatives and stimulus packages have provided support to the real estate and construction industries, and have proved invaluable in allowing first-time buyers to enter the market, as have credit leniency measures. Changes to regulations related to stamp duty may well also further improve the prospects of first-time homebuyers in New South Wales and the Australian Capital Territory. Rising consumer confidence is certainly driving decisions to buy homes, and many homebuyers are now also considering purchasing in the countryside, thanks to the advent of remote working options.
Are you thinking of buying or selling property while conditions are good? Let Perfect Agent recommend a real estate agent that understands your exact needs, and can help you to buy or sell quickly.