Wrapping up the EOFY & trends for 2021
Written on the 19 July 2020
Its been a year of surprises that began with a returned Liberal Coalition Federal Government and falling interest rates, which injected new confidence into the market and a pivot back to growth.
We're ending the year in the midst of the world's first pandemic in more than 100 years, with the first recession in Australia in three decades now underway because of it.
Yet property continues to demonstrate its magnificent resilience, with only slight falls in the median value of East Coast capital city homes and impressive price stability in regional areas since this all started.
At a Glance:
1) Capital city home prices have fared well despite the Australian economy slipping into a Coronavirus induced recession
2) East Coast capital city homes went up by 13.3 per cent in Sydney
3) Turnaround from FY19 when values fell by -9.9 per cent in Sydney
Over FY20, East Coast capital city homes went up by 13.3 per cent in Sydney.
This is a turnaround from FY19 when values fell by -9.9 per cent.
The property market is pretty stable overall but as expected, we have seen a shift in prices of about -5 to -10 per cent in many markets. Employment is the biggest economic macro affecting property and there's been 835,000 job losses reported by the Australian Bureau of Statistics so far (likely higher but JobKeeper recipients are recorded as employed). Another big macro is consumer confidence but this is actually on the rise, with the weekly ANZ/Roy Morgan consumer confidence series recording a 42 per cent lift between March and June.
This has contributed to more new listings coming onto the market and more going through to auction instead of selling prior.
After a 33 per cent dip in April, national sales volumes bounced 21.5 per cent in May and 29.5 per cent in June, according to CoreLogic.
We're not seeing distressed sales yet because JobKeeper, JobSeeker, early access to super and bank repayment holidays have kept people financially afloat.
A big test is coming in September when JobKeeper ends and mortgage repayments resume.
While the media continues its scare-talk of an 'economic cliff', remember that the Morrison Government has done a magnificent job managing this pandemic, so much so that we were the only advanced economy to receive an upgraded outlook from the IMF last month.
Governments are already moving to soften the recession by fast-tracking infrastructure projects nationwide and introducing HomeBuilder to boost the crucial residential construction sector, which directly or indirectly employs about 6% of the workforce.
As we wait to see how this all plays out, here are some trends we expect to see in 2021:
1) Millions of Australians have already changed their living arrangements to save money and this will continue, particularly multi-generational households
2) More people will work from home permanently and relocate to lifestyle locations
3) Foreign investors and ex-pats are perceiving Australia as a 'safe haven' and returning. The lower dollar is also encouraging ex-pats
4) Renters will have great choice and negotiating power. No immigration and fewer international students will hit inner city and university areas hardest
Record low interest rates will be one of our saving graces during the first year of recession.