Can SA house prices really rise 10 per cent in 2021 after coming through COVID unscathed?

While Darryl Kerrigan from classic Aussie film The Castle might say “tell him he’s dreaming”, the numbers tell us a different story.

There’s a growing group of forecasters predicting big things for real estate values in the year ahead.

Virus shmirus, they say, believing that home prices will be boosted by record low interest rates, rebounding consumer confidence, easier credit, huge government stimulus and targeted home buying and building incentives.

The vibe is positive.

Forecasts by SQM Research have Adelaide home values rising by up to 10 per cent in 2021 – the third-strongest performer in the nation.

Meanwhile, Property Investment Professionals Australia says median house prices in Adelaide and every other capital city have been higher five years after all of the four previous recessions since 1980.

South Australian property owners have been told for years that our home prices rise slowly and steadily, ignoring the booms and busts of the bigger capital cities.

It’s meant we don’t share in the excitement of rapid property price growth, but we also avoid the pain when prices head south by 10 per cent or more.

The results were surprising.

Since 2000 there have been five separate calendar years where Adelaide house prices climbed more than 10 per cent. That’s averaging one such rise every four years, and we haven’t had any since 2007, so we’re more than due.

Real Estate Institute of Australia data shows our biggest annual gains in the past two decades were:

• In 2003 Adelaide house prices surged 33 per cent.

• They jumped 21 per cent in both 2002 and 2007.

• There was a nice 15 per cent gain in 2001.

• In 2004 prices rose 12 per cent.

Of course, past performance is ancient history in the financial world, and nobody can predict the future.

But it shows that a 10 per cent-plus property price gain is not impossible. Other capitals such as Hobart, Sydney and Melbourne have done it in recent years, and forecasters reckon Perth could be heading that way too after a poor period lately.

Predictions of slight growth or flat forecasts for 2021, which we saw just two months ago, are being replaced by more bullish sentiment.

Factors behind this change of mind include a growing confidence that the Reserve Bank will leave us with ultra-low interest rates for a long time, a surge in housing finance approvals that suggests a supply squeeze looms in 2021, and Australia’s brilliant handling of the pandemic compared with most other nations.

COVID-affected borrowers are coming off home loan repayment deferrals faster than expected, while fears that the end of JobKeeper in March will cause forced sales were replaced by a realisation that the hardest-hit workers have been younger renters rather than older owner-occupiers.

And, of course, it’s the vibe. I rest my case.

 

Anthony Keane, Adelaide Now, 13 December 2020
https://www.adelaidenow.com.au/news/opinion/dreamin-of-a-10-per-cent-rise-in-adelaide-real-estate-values/news-story/9361ad7717aee4dd5e6f245eb3b9a929?btr=0871e509e18b4d8f83e87cdb712bbb03