According to data, Queensland appears to have outstripped the other states in 2020.
The Sunshine State recorded solid demand for detached houses, with buyer attraction towards lifestyle areas seen to deliver 6-10 per cent capital growth in 2021 across South-East Queensland.
Brisbane too saw solid growth on the back of interstate migration, a broad range of stimulus measures and positive changes in market sentiment, with local and interstate investors driving the property price lift.
At the end of 2020, Corelogic reported a 4.14 per cent increase in its Brisbane home value index over the last year, with houses climbing 4.66 per cent and units rising 2.33 per cent year-on-year.
However, property experts have cautioned that the city’s growth may not be as grand as expected, so can the Sunshine State capital maintain its momentum this 2021?
Property values
After the property market finished the previous year with solid foundations, housing values continued to climb through the first month of 2021.
Australia’s housing value rebound continued into 2021 with the CoreLogic national home value index rising by 0.9 per cent in January. The monthly increase takes national prices to a record high, exceeding the previous record hit in 2017.
Brisbane’s market recorded a 0.9 per cent monthly increase in January with the median value at $527,826. This brought the quarterly capital gain to 2.5 per cent, with growth of 4.0 per cent year-on-year.
Similar to the other cities, houses in Brisbane performed better than units over the month, rising 1.0 per cent, while units climbed a moderate 0.4 per cent.
At an annual rate, Brisbane house values rose 4.9 per cent.
Based on the median price growth, a house in Brisbane that was purchased in January 2020 for $750,000 would now be worth $786,750. However, the current median value for a house in Greater Brisbane is $583,902, the highest it has ever been.
Meanwhile, Brisbane’s unit prices currently sit at a median price of $393,177.
Dwelling prices are expected to continue rising as investor activity continues to strengthen across the nation, with Brisbane proclaimed to be more appealing than its capital city counterparts.
According to a recent Property Investment Professionals of Australia (PIPA) survey, an increase in the number of investors, combined with stronger activity from owner-occupiers and first home buyers, is expected to exert extra pressure on prices across the nation. A majority of the 1,100 investor participants said that as the nation recovers from the economic impact of COVID-19, they are more bullish about Brisbane than Sydney and Melbourne.
Consumers are also optimistic about Brisbane’s property values.
Figures from OpenAgent.com.au’s latest Consumer Sentiment Survey showed that Queensland sentiment is the highest it’s ever been, with almost 88 per cent of respondents believing that property prices will continue to rise in the following six months. Meanwhile, 10 per cent expect prices to remain flat, while 2 per cent believe prices will edge down.
Supply and demand
National residential property listings fell in January 2021 by 2.9 per cent, sliding from 272,999 in December 2020 to 265,116. All capital cities saw a decline in property listings over the month except for Perth. Compared with the same period in the prior year, listings were down by 10.5 per cent.
Brisbane’s listings fell at a monthly rate of 3.5 per cent to 25,720 in January 2021 from the 26,643 listings recorded in December 2020. Compared with 12 months ago, listings fell 12.0 per cent in the Queensland capital city.
According to SQM Research managing director Louis Christopher, January traditionally sees a drop in properties listed for sale as the market emerges from the “summer holiday mode”.
But he noted the increase in annual listings. “However, when we consider the number of new listings compared to January 2020, there was a material rise in nearly all cities. This finding is consistent with the observed early start to the auction market over January and February,” he said.
Provisional internal migration data from the Australian Bureau of Statistics showed that the nation’s capital cities had a net loss of 11,200 people during July, August and September last year, which was the largest on record. According to ABS, Brisbane gained the most people through net internal migration (3,200), while Sydney lost the most (7,800).
Propertyology’s head of research, Simon Pressley, explained that while the capital cities are being hampered by the COVID-19 pandemic, regional Australia has not suffered the same fate on the health front. On a bullish note, Mr Pressley concluded that the regions will continue to dominate the property game for years to come.
Auction rates
Auction activity continued to ramp up at the start of the year and capital city clearance rates are picking up as low borrowing costs are seen to stick around for another few years.
According to data from CoreLogic, auction volumes across the country increased from 884 in the week ended 31 January, which resulted in a clearance rate of 77.2 per cent, the highest final clearance rate recorded since February 2017.
During the last week of January, 50 homes went under the hammer last week, up sharply from a week earlier when 390 auctions were held.
“Such strong auction results signal further upwards pressure on housing prices amid extremely tight advertised supply levels and above average buyer demand,” CoreLogic noted.
Rental values
Throughout the pandemic, stalled overseas migration has caused an oversupply and weak demand for units. But there are early indications that the rate of decline is easing across the unit sector, which is good news for landlords who may have unoccupied properties for extended periods of time.
Brisbane, which was also declining, recently showed signs of stabilisation as rents begin to slowly edge up. The city posted an annual decline 0.3 per cent, with houses in positive territory rising at 3.2 per cent.
The January figures show a promising return to normal, at least where the market is concerned. The recovery has likely been spurred on by the increased government spending and rising consumer confidence.
Vacancy rates
Every capital city saw a fall in the vacancy rate from December to January. Nationally, vacancy rates slipped in January to 1.9 per cent, the lowest vacancy rate since March 2020, prior to the pandemic according to Domain.
In Brisbane, vacancy rates declined to 2.3 percent in January 2021 from December’s 1.9 percent. This brings the annual vacancy rate to 1.6 percent during the first month of the year.
Dr Nicola Powell, senior research analyst for Domain, commented that it is typical for the rental market to tighten in January following a seasonal boost of supply over December.
“All capital cities have tighter rental markets than at the same time last year, except Melbourne and Sydney. Melbourne’s vacancy rate is more than double last year’,s while Sydney’s remains steady annually, following a COVID-induced bounce during 2020.”
“Strong exposure to international border closures in Melbourne and Sydney will ensure significantly less demand for rentals for the foreseeable future, at least until international border restrictions are lifted,” she concluded.
Hotspots
For those looking for the next Queensland hotspots, Apollo Auctions director Justin Nickerson pointed to Brisbane’s outer inner-ring as the “sweet spot”.
According to him: “That has always been the sweet spot for Brisbane – suburbs that are three to five kilometres from the CBD – traditionally with good schooling and lifestyle options. These suburbs have grown steadily across the past four years.”
He also flagged that the remote-working environment may also translate to an influx of buyers in areas such as Wynnum, Manly, Sandgate or more coastal regions.
The 2021 PIPA Brisbane breakfast seminar is on Thursday 15 April 2021 at the Sofitel Brisbane Central.
The breakfast will be a chance to hear from PIPA chairman Peter Koulizos as well as from two expert speakers.
PIPA chairman Peter Koulizos will provide an update on the association and the national market.
REIQ CEO Antonia Mercorella will outline how state-based legislation is impacting property investors now and into the future.
Herron Todd White Director David Hyne will provide insights into the challenges of assessing property value in rising market conditions.
A light breakfast will be served.
PIPA members will earn five CPD points from attending. Of course, it will also be an opportunity for everyone to network, so it really is a must-attend event.
Don’t delay in registering as you really don’t want to miss it!
The total rate of new loan commitments for housing and the value of owner-occupier home loan commitments each reached record highs in December 2020, according to the latest Australian Bureau of Statistics data, however investors are still relatively absent from the Perth marketplace.
Nationally, new loan commitments rose 8.6 per cent to $26 billion in December 2020, and when you delve into the Perth numbers there are three distinct markets.
First homebuyer lending significantly rose, with 2469 new loan commitments, while owner-occupiers enjoyed a record high new loan commitment value of $2.187 billion.
Dragging its feet however is the investor market, which only represented $378 million in finance, rising from a record low of $164 million in April 2020.
Realmark Coastal Director Nathan Burbridge has noticed this lack of activity.
“What I am experiencing in my marketplace is that there are a lot of tenants that have already sold up and a lot of previous homeowners that are now in the market big time,” he said. “Whereas what I think will happen around March and April – once the government padlock comes off – is that there will be a mass exodus of tenants that have bought something.
“This is the pandemonium at the moment – where most of the buyer hype is coming from.
“Out of the last 20-odd sales I have done, there was about two investors.”
Western Australia’s rate of investor new loan commitments pale in comparison to New South Wales, Victoria and Queensland, with Sydney-based Property Investment Professionals of Australia Chairman Peter Koulizos saying investment activity has been growing nationally over recent months, which is a situation set to ramp up this year.
Mr Koulizos said with owner-occupiers, investors and first homebuyers out in force at the same time, there was only one way for property prices to go – up.
“If you add low supply levels, as well as once-in-a-generation interest rates into the mix, property markets are set for strong conditions for the foreseeable future in my opinion,” he said.
However, whether investors will return to the Perth marketplace or not is still in the air.
The current level of investor new loan commitments is at its highest since April 2017, but when looking at a longer timeline it is less impressive, especially when compared to the more than $1 billion in new loan commitments from investors seen in September 2014 and the high of May 2006 ($1.139 billion).
While investors are not out in force, the general market is performing strongly, according to Mr Burbridge.
“Before the lockdown, I had 137 groups through one of my homes, eight offers and sold for $150,000 more than the seller’s expectations,” he said. “We have had some good growth over the last 12 months.”
According to CoreLogic’s February Hedonic Home Value Index, Perth property prices have risen 1.6 per cent for the month, up 3.4 per cent for the year.
REIWA President Damian Collins said the rental moratorium, which froze rent prices, had impeded investors entry into the market and the local rental market needed more investors to keep a lid on rent price growth.
“There were just 2826 properties for rent in January 2021, compared to 5784 in 2020, which is a drastic reduction in stock and we currently have a severe rental shortage,” Mr Collins said.
“While in the short term these conditions will entice investors back to the market, it is imperative the State Government keeps their promise to end the rental moratorium on March 28, 2021 to ensure the situation does not worsen.”
While rents have risen in recent months, many pundits have predicted further price growth once the rent moratorium ends, and many renters whose leases are up have already felt the sting.
Mr Burbridge said he didn’t see investors returning to the market for a little bit longer, as he noted that the positive return on investment in the stock market was currently a more attractive proposition.
“I think it will be a long, drawn out process, some will come in later on in the year when they see the market increasing and buyer sentiment and prices going up, but they haven’t realised yet they are 18 months behind the eight ball,” he said.
Australia’s residential property price surge is underway, despite investor activity falling as a proportion of the buyer market.
Although there has been steady monthly increases in investor lending since June 2020, the market share of overall residential loans for the investor sector fell to a record low of just 19.5 per cent over December – compared to 21 per cent for first home buyers and 59.5 per cent for owner-occupiers.
Investors are also weighing up economic uncertainty, mortgage repayment reprieves ending very soon, and the federal government’s $25,000 HomeBuilder subsidy being reduced to $15,000 at the start of the year, and set to be wound up by the end of March.
While the investors may be sitting on the sidelines for now, Australians as a whole are borrowing more money for property than ever before and among investors, two-thirds have expressed confidence that property market conditions will strengthen.
Property Investment Professionals of Australia (PIPA) Chairman Peter Koulizos said the current price growth should not be a surprise.
“The low point for investment activity was May last year, however, new loan commitments have grown since that time to be about 10 per cent higher in December than the same period the year before,” he said.
“In fact, the latest official data shows that more than $6 billion-worth of new investor loans were recorded in December – the highest level since July 2018.”
With strong activity from owner-occupiers and first home buyers already under way, the increasing number of investors in the market was expected to add to property price pressure in many locations around the nation.
“Part of the reason for dwelling price rises is the low supply of properties that are hitting the market, which was also foreshadowed in last year’s survey when 71 per cent of investors indicated that the pandemic had made them less likely to sell a property over the short-term,” Mr Koulizos said.
Queuing up for debt
While many are dreading the imminent end to the home loan deferral scheme – or so-called mortgage holidays – that have helped hundreds of thousands of struggling homeowners during the coronavirus pandemic, there’s no shortage of borrowers lining up for more loans.
The total value of new loan commitments for housing reached a record high in November 2020, rising 5.6 per cent to $24 billion.
The value of new owner occupier home loan commitments – not investors but people buying to live – rose 5.5 per cent to $18.3 billion.
Justin Doobov, founder of leading independent mortgage broker Intelligent Finance, agreed that the overwhelming weight of owner-occupier demand in the market is overshadowing the traditional investor market.
He said the investor sector was still very active but impacted by the perfect storm of factors such as low interest rates, the raft of incentives to support first home buyers, and reduced rental demand from the overseas student tenant pool.
“We would need to see a significant shift in either migration, or incentives to underpin a stronger burst of investor activity – until then, there’s daylight between investor and owner-occupier lending,” he said.
There are, however, market segments and locations nationally that look poised to benefit the soonest from any increased investor activity.
Mr Doobov said lifestyle investment dominates lending activity whether along Australia’s east coast or in the west.
“The conditions have never been better when it comes to borrowing to either improve your existing home or upgrade entirely and we are seeing an extraordinary demand from clients who are driven totally by lifestyle,” he said.
“They’ve spent more time in their home in the past year than ever before and they want that space to work more effectively for them – as a home, workplace and retreat.
“We’re talking about a totally different return on investment.
“We’re also seeing increased demand from buyers looking for lifestyle investments an hour or two from major centres – in the country, on beaches, in more remote but still connected locations.
“This is cyclical, and we expect many of these properties will revert to investment and part-time occupancy properties in time as buyers return to the city centres.”
Risk and reward
Chief Economist at property technology company Archistar, Dr Andrew Wilson, said questionable restrictive lending practices by banks over recent years have been a clear contributor to the unprecedented collapse in activity from investors with clear ramifications for the supply of new homes, particularly apartments.
“This also has significant consequences for currently much-need economic activity from a clearly labour-intensive sector.”
According to Archistar, NSW remains the top performer for investor activity with December loans approved valued at $2.63 billion, followed by Victoria ($1.52b), Queensland ($1.07b), Western Australia ($0.38b) and South Australia ($0.24b).
Prominent Perth-based property commentator Gavin Hegney told API Magazine that for investors to return to the market in a significant way there needed to be an appetite for risk.
“People invest when they believe prices are going up and the time is right for them,” he said.
“The only thing I’d say is some of the best opportunities come at the worst time for us, and we have to try to make them happen — use the past lessons of what you have missed to put the fuel in your investment engine.
“The opportunities we miss today are either mistakes or they are drivers for future success. It’s your choice — the best investors have often missed more opportunities than most yet this has subsequently powered them to make the good decisions which have made them the best.
Mr Koulizos said rising prices were alleviating that sense of risk.
“With owner-occupiers, investors, and first home buyers out in force at the same time, there is only way for property prices to go and that’s up,” he said.
“If you add low supply levels as well as once in a generation interest rates into the mix, then property markets are set for strong conditions for the foreseeable future in my opinion.”
Craig Francis, Australian Property Investor, 11 February 2021
https://www.apimagazine.com.au/news/article/residential-investors-look-set-to-return-from-the-sidelines/
Property investors are set to continue boosting their presence in the market over the next months, which could potentially lead to price increases, according to the latest report from the Property Investment Professionals of Australia (PIPA).
Peter Koulizos, chairperson of PIPA, said investment activity has been growing over recent months, which is a situation set to ramp up this year.
New loan commitments from investors have grown since the low point for investment activity in May, up by about 10% in December over the same period last year.
“In fact, the latest official data shows that more than $6bn worth of new investor loans were recorded in December – the highest level since July 2018,” he said.
Koulizos said the increasing number of investors in the market, coupled with the strong activity from owner-occupiers and first-home buyers, would add to the property-price pressures in many suburbs across Australia.
“Part of the reason for dwelling price rises is the low supply of properties that are hitting the market, which was also foreshadowed in last year’s survey when 71% of investors indicated that the pandemic had made them less likely to sell a property over the short term,” he said.
Still, investors are more bullish in their outlook for smaller capital cities and regional areas. The PIPA survey released late last year showed that the share of investors that said regional markets were the most appealing increased to 22%.
“If you add low supply levels as well as once in a generation interest rates into the mix, then property markets are set for strong conditions for the foreseeable future,” Koulizos said.
The latest figures from CoreLogic showed that dwelling values have already surpassed pre-COVID levels by 1% in January.
Every capital city and broad rest-of-state region recorded a rise in housing values over the month, with Darwin reporting the highest growth at 2.3%.
