Herron Todd White (HTW) has released its final property clock for the year, looking at the factors which drove the property market in 2021.
Noting it was a year like no other, HTW National Director of Group Risk and Compliance, Kevin Brogan said the 2021 residential property market in Australia had been characterised by some of the strongest conditions ever seen.
“What sets this year apart is that strong price growth has been experienced in most market segments (geographically, by price point and dwelling type),” Mr Brogan said.
That strength was largely attributed to both the fiscal and lifestyle response to COVID, including low interest rates, government stimulus initiatives, and lifestyle changes.
“Working from home has reduced transport costs for many and there have been reduced opportunities for spending on entertainment and travel due to lockdowns and travel restrictions. As a result, there has been an increase in household savings,” Mr Brogan said.
“Strongly increasing residential property prices have been seen in all capital cities, but regional markets have performed even more strongly.
“Owner occupier buyers are looking for more space to live, flexible space to accommodate working without diminished residential enjoyment and locations with lower population density.”
A standout feature of 2021 was the regional market, where demand consistently exceeded supply.
“Even with rapidly increasing prices, metropolitan buyers are viewing fringe and regional property as good value buying,” Mr Brogan said.
“With such widespread strong price increases, the list of high performing areas is long, but it includes the Sunshine Coast, Mornington Peninsula, The Illawarra.”
In other trends seen throughout the year, HTW noted the demand for new homes and lack of supply saw record levels of property construction.
However, this was hampered by supply chain disruption, and shortages of skilled labour and materials.
Meanwhile, HTW also pointed out that in addition to increased property transactions throughout the year, there had also been a corresponding increase in mortgage valuations undertaken.
Mr Brogan noted this reflected a situation where owners were not buying or selling property, but rather tapping into increased equity.
“High transactional costs mean that many homeowners are also ‘staying put’ and refinancing to renovate,” Mr Brogan said.
Looking at the final quarter of 2021, Mr Brogan said price growth now appeared to be slowing across some markets due to a range of factors including increased supply, decreased affordability and the Australian Prudential Regulatory Authority’s tightening of lending criteria.
“One final trend to keep an eye on is that through November and December we are moving to a new phase of the pandemic, specifically with interstate and overseas borders intended to be more permanently open and a move to ‘living with COVID’,” he said.
“These population movements could impact demand in local markets over the coming months driving further price growth.”
New South Wales
Sydney house prices had been expected to moderate in 2021, but their growth far exceeded anyone’s expectations.
By October 2021, CoreLogic data found the median dwelling value in Sydney grew by 23.8 per cent to $1,071,709, with houses increasing by 27.8 per cent to $1,333,767, while units increased by 14.5 per cent to $837,262.
“The two major factors that contributed to this growth were the continued access to finance at historically low interest rates along with the supply of new listings being constrained and not keeping up with the demand in the market,” HTW said.
Beyond the capital there was also growth, with Byron Bay among the areas noted for its rapid price acceleration.
“The slight improvement in Byron Shire’s property market in the latter months of 2020 turned out to be nothing but a curtain raiser for the main event that was to follow in 2021,” HTW reflected.
And the sudden acceleration of the market caught many by surprise.
“It wasn’t just the speed at which the market moved, it was the extent that it moved as well.
“The market was driven by a greater than usual surge of non-local buyers and the now well documented tranche of big city escapees looking for their own, COVID-free piece of paradise.”
To illustrate the point, HTW explained a property at 1663 Hinterland Way, Ewingsdale sold in January 2020 for $2.495 million.
“At the time of writing, this property is under contract for a reported $4.3 million – a 72 per cent gain over 22 months,” they noted.
In Victoria, extended lockdowns throughout the year did little to dampen the enthusiasm for property.
House prices in and around Melbourne enjoyed growth, as did regional areas, with the Mornington Peninsula proving a particular standout.
“The increased attraction of the beachside and regional lifestyle has drawn many to the peninsula where prices have jumped,” HTW said.
“The trendy and relatively affordable suburb of Rye has been no exception to this increased activity and has seen a rise of $200,000 in median prices.”
While Melbourne’s unit market took a hit due to an exodus to regional areas, HTW said high vaccination rates and the end of lockdowns had now resulted in the beginning of a recovery.
HTW noted South East Queensland had been waiting a while for a ‘hot price run’, and 2021 delivered the state’s opportunity to shine, courtesy of several factors in its favour.
Among them were increased infrastructure, increased net internal migration and the announcement of the 2032 Olympics.
This saw Brisbane enjoy value gains that were neck and neck with Sydney at 25.2 per cent.
Beyond the capital, South East Queensland’s growth corridors also enjoyed price rises, with vacant land in high demand.
The property market momentum continued further afield as well, with locations like the Gold and Sunshine Coasts also experiencing extraordinary price gains.
HTW cited an example on the northern Sunshine Coast where a property at 3 Maher Terrace, Sunshine Beach sold in March 2020 for $2.1 million and was recently purchased for $4.4 million, equating to a staggering 110 per cent increase.
Most regional areas enjoyed price increases as well, with Cairns, the Darling Downs, Mackay, Rockhampton and Gladstone all among the winners for 2021.
In South Australia, it was a similar story with the pace of price growth exceeding most people’s expectations.
In and around Adelaide dwelling prices rose 20.07 per cent year-on-year with growth across the board in terms of location, property type and price point.
HTW noted most areas of Western Australia experienced a significant upswing in market activity, with the increase in market values in some areas described as “truly staggering”.
Low rental vacancy rates saw investors re-enter the market, while high demand and low supply saw prices rise across most suburbs.
Top-performers included Perth’s western suburbs where Cottesloe demonstrated annual growth of 33.2 per cent, Dalkeith grew 28 per cent and City Beach 37.3 per cent.
“The growth seen in the prestigious western suburbs absolutely dwarfs the Perth metropolitan average of a somewhat miserly eight per cent,” HTW stated.
In regional areas the results were mixed. HTW explained Karratha had remained subdued after a strong 2020, while Port Hedland quickly gained ground, with the median house price increasing 44.3 per cent over the year.
In South Hedland, the gains were even stronger, with prices rising 71 per cent.
The Northern Territory
HTW said the northern Territory enjoyed strong activity in the first half of 2021, with the top end experiencing only limited Covid-19 disruptions.
The prestige market fared well, as did house and land packages, which were spurred on by government grants to first home owners.
By the end of the year, unit prices were showing promising signs of recovery.
“Traditionally it follows the dwelling market as purchasers start to become priced out of the dwelling market,” HTW reported.
“Across Darwin, transactions increased by 89.1 per cent from the previous year and the median price for units is now $390,000 which is a 30 per cent jump from 12 months ago.”
The Australian Capital Territory
In the ACT, 2021 saw new housing estates fill quickly, while suburb records were broken for established dwellings.
Material and labour supply proved a challenge for the construction sector, with the Territory now experiencing a backlog of home builds with some builders already booked out for the duration of 2022.
“We are also witnessing building tenders being valid for much shorter periods due to escalating building material costs,” HTW said.
Meanwhile, homeowners also put the available equity in their property to use, buying investment properties, upgrading or renovating.
HTW explained more and more mainlanders were choosing to call Tasmania home due to its idyllic lifestyle and relatively affordable housing.
That saw house prices rise in many regions across 2021, and in Hobart, that growth outperformed most other capital cities.
“Properties are still selling well above the asking prices (normally 10 per cent or more higher in most cases),” HTW said.
“The threat of tighter lending criteria and possible interest rate rises may slow the property market in the foreseeable future, however the lack of supply may minimise the impact.”