It is no secret that 2021 has been the year of the new-normal, but as COVID-19 continues to influence changes in our communities, people have had to adapt now more than ever before. The property market started off the new year strong replicating similar growth figures from the year prior. However, the ongoing threat of the virus has seen the revival of intense state lockdowns, resurfacing the community issues of housing affordability and low housing stock levels. These hindrances have encouraged buyers to be more educated and thoughtful about their next property purchases.
Buyers Want Bigger and Better
Last year, many buyers purchased with the intention of saving money and buying a home in the rising market. With the removal of construction boosting Government Initiatives, specifically the HomeBuilder Grant, buyers have become more rational in their decision-making. The uncertainty of community lockdowns and the rise in work-from-home requirements have highlighted the importance of ‘loving the home you’re living in.’ People want bigger homes and better lifestyles. House-hunters have been attracted to bigger homes with more space as they are spending more time at home during the pandemic.
Demand for homes in well-connected, middle-ring suburbs is growing. Prospective buyers are now seeing the worth in house-hunting in the outer suburbs and regional areas surrounding the city centre. With people working from home and spending more time at home in general, they are looking for larger properties with more bedrooms, rather than high-value, smaller lots in the city.
Investors Are Back
Low interest rates, high household savings and Government support have driven rapid price growth across most of Australia, helping to reboot investor confidence in the market. The expectation that property prices will continue to grow is a significant driver of the recent increase in investor activity. The strength of Australia’s economy is also having an impact. Investor demand in the Australian property market took a hit in 2020. For the first time in more than a decade, the volume of lending to first-home buyers exceeded that to investors. The number of investors coming back to the market is not at record levels but has improved greatly since last year.
Data from the Australian Bureau of Statistics has shown that the value of new loan commitments for investor housing rose 13.3 per cent to $9.1 billion in May 2021, which was the highest level since June 2015. While the value has risen, investor loans made up 28 per cent of the total value of housing loan commitments in May, compared to 46 per cent in 2015, the data showed.
Low Interest Rates and Rising Property Prices
Property prices are expected to continue to rise over the rest of 2021 and into 2022 as the Reserve Bank of Australia keeps interest rates at a record low, although factors such as affordability, rises in fixed mortgage rates and potential action by regulators are set to take some heat out of the market. Economists at the big four banks expect property prices to surge by at least 10% and as much as 17% this year, before growth slows to a still-solid 5% or 6% in 2022. With fixed interest rates rising slightly for mortgage lenders, and affordability issues emerging particularly for first home buyers, now competing against investors for properties, growth is expected to be slow.
There are two sides to affordability and what has been seen recently is the improvement of home loan repayments as a result of falling interest rates, however the major hurdle many buyers are facing is saving for a deposit. The current house price swings are the result of a number of factors, including a lack of supply particularly in the regions, strong Government support, overall house price growth and a swift economic recovery. Nationally, it’s now cheaper to buy than to rent 36.2 per cent of Australian properties, up from the 33.9 percent found in February 2020, which has been caused largely by the historic fall in interest rates. Many buyers who do not have intergenerational support are still experiencing FOMO (Fear Of Missing Out) as well as 2021’s newest game of emotion: GOMO (Grief of Missing Out).
Although the construction-boosting HomeBuilder Grant has come to an end, there are still many opportunities waiting to be snatched up by new home buyers. In July 2021, 30,000 new spots opened up to eligible applicants for the First Home Loan Deposit Scheme, the New Home Guarantee and the Family Home Guarantee. These Government Initiatives are a Federal response to the challenge of saving a house deposit as a new buyer or single parent. To read more on how these Initiatives can benefit you, visit our First Home Buyer page.