There is no doubt that the pandemic continues to have a significant impact on the Australian property market.
Outbreaks and lockdowns have made working from home a normality and our emphasis shifted to the lifestyle at home. First home buyers with government incentives, and buyers looking to upgrade or downsize flocked to the market. Combined with record-low interest rates, this intense buyer demand created an explosion in property prices.
Here are 5 things you need to know about the booming property market.
1. It’s moving fast
According to CoreLogic, Australia has the fastest pace of annual growth since 2004. Combining ultra-low interest rates, easily accessible credit and rampant buyer demand, national house prices surged 14.1 per cent in the first six months of 2021.
Australia’s 10.6 million residential dwellings are now worth more than $8.2 trillion, after rising by a massive $449.9 billion in the March quarter to breach the $8-trillion mark for the first time.
Despite current lockdown measures in eastern states, the market is showing no signs of slowing. Recently, domain.com.au reported that Sydney house prices are rising almost $1200 a day in the second quarter of 2021.
2. Ultra low interest rates attracting investors
When the Reserve Bank of Australia dropped the official cash rate to the historic low 0.1 per cent, first home buyers, upsizers and downgraders flooded to the market. Taking advantage of easily accessible credit, funds that were saved overseas holidays or renovations were redirected towards home loan deposits.
After watching carefully from the sidelines, investors are resurfacing in the market and out pricing first home buyers this year. In May, the Australian Bureau of Statistics announced that investor loan commitments had risen 13.3 per cent, totalling $9.1 billion, the highest since April 2015.
As investment loans continue to climb, savvy investors reaping the benefits record low interest rates, future capital growth and strong rental yields as the opportunity to borrow at low interest rates is predicted to stay until 2024.
3. Regional house prices surge
Coupled with ultralow interest rates and easy access to credit, city dwellers are moving in droves to regional areas in search of more relaxed affordable lifestyle locations.
The pandemic accelerated the already popular trend of investing in regional areas with good infrastructure and diverse economies. For investors in regional satellite cities in regional New South Wales, capital growth became instantaneous as house prices grew an astonishing 21.1 per cent.
4. Rising rents and rental yields
Rental values have increased across the nation by 6.6 per cent. This is the strongest annual appreciation in rents since February 2009.
Interestingly, regional rents are now outpricing capitals. For instance, in Port Macquarie on NSW’s North Coast, house rents jumped 19 per cent and units 22 per cent.
In these regional satellite cities, we are seeing a growing trend of property managers contacting developers half way through constructions with tenants ready to go. This is a positive sign for investors of tenancy demand and continuing low vacancy rates in these areas.
Now to rental yields.
Nationally, rental yields are sitting at 3.41 per cent. However, yields in NSW blue ribbon suburbs such as Armidale, Goulburn and Tamworth are strong with 5% rental returns for single homes.
Rental yields in Perth have sky-rocketed as the capital city has re-emerged as a popular lifestyle location for interstate movers.
Landlords in Armadale (7.9 per cent), Success (7.1 per cent), Cloverdale (6.9 per cent), Glendalough (6.9 per cent) and Queens Park (6.8 per cent) yielded the highest rental returns
5. Suburbs of gold in Brisbane
Potential buyers have gone into overdrive following the recent announcement of Brisbane as host of the 2032 Olympic Games.
When Sydney was named as host for the 2000 Olympic Games in 1993, median dwelling prices in surrounding suburbs soared by 60 per cent over the 7 year period. Property economists are anticipating that the Brisbane housing market will follow in the same footsteps.
As construction begins in Brisbane for new athlete villages and infrastructure upgrades to transport, services and amenities commence, we expect to see housing demand rise. This will have a positive flow-on effect for house prices and capital growth.
If you want to know more about investing in the property market, reach out to the team at AssetBase.