The Australian property market has proven itself to be nothing if not resilient, coming out of the country’s first recession in nearly three decades with home values sitting a solid 3 per cent higher (according to CoreLogic data).
According to the latest Domain House Price Index released in January, the nation’s median house value hit a record high of $852,940 in the December quarter - with median house prices in Sydney and Melbourne also reaching record peaks ($1,211,488 and $936,073 respectively).
At Upside, our national network of agents have welcomed an 86% increase in average open home inspection groups through homes for sale in January alone, compared to the same period last year.
The onset of the pandemic saw our borders close to international visitors, resulting in one of the steepest declines in population growth. Faced with such a reality for the near future, it begs the question: Why are house prices soaring, and where is the overwhelming demand for housing coming from?
Coming out of recession
Time and time again, we seem to come across the phrase ‘A recession like no other’, when talking about the latest recession, and it is highly applicable here. Historically, recessions have led to mass job losses, forced sales of family homes and possessions, and staggeringly low home values.
It has been a recession like no other as the blow was cushioned by government subsidies such as JobKeeper, early access to super, historic low interest rates and loan deferments that were made available at the onset.
Towards the end of last year, it was in fact reported that in the face of a rise in unemployment, the national savings rate was actually up, with overall household income growth increasing thanks in part to the lack of travel allowed with the closure of borders - running parallel with growing consumer confidence.
What’s behind the price rise?
According to the latest CoreLogic Weekly home values index, listings across capital cities are down 18.7% compared to this time last year, but it’s also important to note that we also saw unusually low volume in 2020 due to a slumping house market. In comparison to 2019, homes for sale are almost down 40% (approximately over 40,000 properties that haven’t gone to market.)
The uncertainty caused by the pandemic saw many home sellers opting to hold off to test the conditions when they proved to be undeniably stable.
Meanwhile, record low interest rates, government incentives and lack of cashed-up migrant and investor competition have pushed first-home-buyers and their counterparts into the market, spurred on by realisitions in our post-covid world that they need to look for homes suitable for a hybrid work future. As a result, regional areas have found home values rise a whopping 6.9 per cent in 2020, and metro suburbs have also experienced an increase in house prices.
In fact, the REA Insights Buyer Demand Index increased by 7.1 per cent last week, with buyer demand now at record levels. The number of high-intent buyers looking for houses increased by 6.8 per cent, while demand for units surged 7.3 per cent.
All states and territories recorded a rise in demand last week, with the number of serious buyers in the market right now 53 per cent higher than the same time last year.
But it all may come to a head soon…
A common question that has arisen out of the current situation has been: is this price rise sustainable?
The current seller’s market is likely to tip ever so slightly in the coming months as more listings come to market, due to the factors below:
- Government subsidies and mortgage holidays that have been in place over the last year are slated to come to an end in March, as some may see themselves forced to sell homes they can no longer afford.
- Even for those who have remained employed and financially secure over the pandemic period, those who would have otherwise made real estate transactions bunkered down and basked in their financial stability throughout 2020, waiting for a sure sign that things have returned to normal.
- The natural movement of downsizers and upgraders was also inhibited last year thanks to the uncertainty of the real estate climate, but this is set to change as consumer confidence hits highs in conjunction with record low interest rates and the continued reminder that house prices are at their record highs.
- We can already see from the stamp duty exemptions enacted in Victoria, that listing volumes have significantly increased off the back of that. With proposed changes coming in March for Sydney, it is of vital importance to watch the news that will be arising from this proposed change, with the expected result being a flood of listings to hit the market as a significant barrier to selling and buying a home is removed.
With Autumn generally a strong time for real estate activity in Australia, if you’re thinking of selling this year, time is of the essence! Right now is the window of opportunity while listings still remain lower than average (meaning less competition) to capitalise on the strong buyer surge in this seller’s market.
Speak to your local Upside agent today to find out what your home is worth in this rising market.