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Property boom predicted for 2021

Five out of 8 Australian capital cities are likely to produce double-digit house price growth in the 2021 calendar year while forty (40) or more non-capital city locations will crack 20 percent capital growth over this 12-month block according to Propertyology’s Simon Pressley.

Pressley says the history books will show that an Australian property boom commenced in Q3 2019 and, with the exception of ‘pause’ being pressed for Q2 2020, it continued for a few years.

“All things being equal, Australia has just commenced an era of accelerated rates of homeownership and wealth creation, in a manner not seen since the 5-years ending 2005,” says Mr Pressley.

As originally forecast by Propertyology prior to lockdown in late-March, buyer activity strengthened as soon as people were permitted out of their Covid-cocoons.

“The widespread property boom that we are predicting is consistent with Propertyology’s commentary throughout the last 12-months.

“In addition to always disagreeing with the forecasts of doom, Propertyology is the only firm in Australia that has maintained a boom forecast throughout the unprecedented year that 2020 was,” said Mr Pressley.

Propertyology’s Predictions For 2021

  1. Greater than 10 per cent rent growth: predominantly in non-capital city locations (lots of them)
  2. Greater than 20 per cent house price growth: more than 40x regional locations
  3. Greater than 15 per cent house price growth: Perth, Canberra, Adelaide and Hobart
  4. 10 to 15 per cent house price growth: Brisbane
  5. 5 to 10 per cent house price growth: Darwin and Sydney
  6. Less than 5 per cent house price growth: Melbourne (a solid Q1 2021, then softening)
  7. Problematic: Apartment values in every major city (excluding Hobart)
  8. Vulnerable: Melbourne and Sydney have several challenges [refer here]

These predictions are caveated by three assumptions

  • an individual location experiences nothing more severe than a 1-month Stage 3 lockdown during 2021,
  • that residents are permitted to cross state borders
  • that it doesn’t become any harder for responsible borrowers to acquire credit.

Looking forward

Propertyology believes that the biggest real estate story of 2021 will be sharply rising rents and extreme difficulties finding a property to rent. 

“While rental conditions are soft in Sydney and Melbourne, the biggest ever rental boom in living memory is already unfolding across the rest of Australia,” said Mr Pressley.

“Improved availability of credit, cheap credit, and low housing supply will be the rising tides to lift all ships however, we remain very concerned about what impact the 113-day hard lockdown might have on Melbourne’s property market,” said Mr Pressley.

Mr Pressley also says its “highly likely” that Melbourne apartment values will remain underwater for some years but there should be a clearer picture around Easter.

He also says Perth has the potential to be Australia’s best-performed capital city property market over the next couple of years, and 20 per cent growth in 2021 is not out of the question.

But – Propertyology have made a conscious decision to avoid this market because they believe there are risks associated with its distinct lack of economic diversity and an unhealthy reliance on China for circa 50 per cent of the state’s income.

Propertyology said that, whilst COVID-19 has created much change in everyone’s lives, most of that change relates to lifestyle, not property market fundamentals.

“To be completely frank, banks and economists have never had an intimate understanding of the mechanics of property markets. They proved that again with enormous doomsday forecasts when the germ arrived on Australian shores,” said Mr Pressley.

“Contrary to the opinions of a cast of thousands, population growth has always played a relatively small role in property price growth. The long list of factors which influence demand for housing 100 per cent of Australia’s current population has a significantly greater influence than the national population not growing by an extra one per cent due to international border closures.” 

Mr Pressley said “Property is shelter, an essential commodity, not an ‘index’ on a bean-counter’s computer screen. It is a fact that Australia had a national shortage of shelter available for sale and for rent immediately before COVID-19. A germ is not capable of creating more shelter.”

According to Propertyology, the various policy initiatives by governments and financial regulators in response to COVID-19 should surprise no one.

“Whether in response to a war, a financial crisis or a health pandemic, responsible and well-managed governments always respond to a crisis with initiatives that stimulate an economy, create jobs and community confidence, and support aspirations with responsible credit supply.”

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