January Property Update

There are some very interesting dynamics unfolding in the current property market as we try to gauge what might happen in 2021.

January backed up the hype that it should be a strong year with a 0.9% increase in national dwelling prices. 

That said, uncertainty around COVID and variation across market segments such as dwelling type and geography, remain prevalent. Regional growth is currently an interesting topic, rife with opinions. 

Nationally, prices now average 1% above pre-pandemic levels however driven by a 6% increase in regional areas across the country. In capital cities however, average prices remain 0.4% behind pre-pandemic levels. Sydney and Melbourne remain the only capital city markets yet to reach positive territory since the COVID downturn.

Units continue to struggle, particularly across the Eastern Seaboard capitals, led by Sydney, where both rent and buy markets remain affected by the cliff in migration and international students. Nationally, unit prices are 1.3% below their pre-pandemic level and fell again in January, giving strength to the prediction that the majority of ongoing growth will come from the detached housing market. 

Regional remains a really interesting case study. Whilst growth during COVID is well documented and accelerated in January, there is common commentary emerging that things may shift over the coming months as it’s questioned whether it’s a sustainable trend. 

The ability to shift life and work to regional areas remains an option largely for established and in demand professionals who hold greater bargaining power in the workplace. Coupled with this is that in Melbourne for example, 75% of the workforce has been asked to return to the CBD and the realities of the old working life may start to rear their head. 

January also presented additional signs of what may lay ahead for the residential property market. 

Firstly, RBA Governor Phillip Lowe made a powerful statement about interest rates; ‘The board will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range. For this to occur, wages growth will have to be materially higher than it is currently. This will require significant gains in employment and a return to a tight labour market’

Home loan approvals, as one of the lead indicators of property market growth, have skyrocketed through to December, being 31% higher than December the prior year and have set high expectations for the coming months. 

Supply remains relatively low, though as prices push up and more certainty and confidence returns with the roll out of a COVID vaccine, we can expect greater activity. 

Sources: propertyupdate.com.au, smartpropertyinvestment.com.au, abs.gov.au.