The media’s constant contradictory reports at the start of the pandemic fuelled a huge amount of investor panic. My own father a real estate veteran of 30+ years was concerned! However, now that things have settled forecasts are pointing to a boom in the property market. But how? Although there have always been fluctuations, there has never been a crash in Australian property values in contemporary history. The fact of the matter is, the current conditions are ripe for property purchasing and there is a closing window of opportunity before the market skyrockets in the new year.
If we consider the global financial crisis of 2008, many Australian property owners reacted in fear, selling property to avoid a “reduction in value”. While property values decreased by 4.3% on average during this time, they rebounded on the heels of both interest rate reductions & stimulus the following year. This led to tremendous amount of capital growth for patient investors. So if we forecast what will happen based on recent history, then we will see accelerated economic growth and rising prices in 2021 & for many further years.
“There has never been a crash in Australian property values in contemporary history.”
While a lack of consumer confidence fuelled by uncertainty due to job losses and the media has reduced the number of potential purchasers in the market, the government intervention has helped drive large volumes of purchasers back into the market. The announcement of HomeBuilder triggered a rise in sales for vacant land, with enquiries on house and land packages increasing by over 300% between March and June 2020. We have also seen more investors purchase properties in regional locations from the comfort of their own home.
Contrary to the media’s speculation of the last 5 months of consistent declines, many of AssetBase’s clients who purchased at the beginning of the pandemic have already experienced significant capital growth. Values have incrementally increased along with demand and many of our investors have already seen the rewards. In fact, there is little to no registered land left to build on in many parts of the NSW & QLD. So, what can we learn from this? Well, what we have seen in the past and what we should keep in mind in the future is that negative economic shocks do not necessarily always affect the housing market…at least not in the long-term.
In conclusion, regardless of the hardships, the Australian housing markets have seen little substantive negative impact. The Australian property market constantly weathers economic hard times very well. In fact, if we compare the purchase price of nearly any piece of developed land from 20 years ago with its current value we can clearly see that the property market has shown exceptional growth.
It is also no secret that the upcoming changes to ease borrowing restrictions and the recent RBA rate drop will see more purchases come into the market in 2021. The increase in competition will accelerate levels of demand, leading to price inflation. This means that right now there is still opportunity to get into the market for strong capital growth in 2021.