WHAT ECONOMISTS PREDICT FOR PROPERTY IN 2021
While globally there's a huge amount of uncertainty in the world, in Australia we escaped relatively unscathed. Admittedly, property sales slowed and prices dropped in April 2020; however, the latter part of the year saw pent-up demand unleashed. We can now say confidently that the worst is over and it’s a seller’s market.
Capital cities that were seen as remote bastions from COVID-19 and lockdowns – Perth, Brisbane, Darwin and Hobart, experienced rapid growth as residents of Sydney and Melbourne, in particular, sought to escape lockdown.
We expect that in 2021, these cities will continue to experience more rapid growth than Sydney and Melbourne that were hit harder by the drop in immigration, international students and tourism. The boom in house building and renovations combined with job recovery should help to push house prices higher throughout 2021.
Importantly, although we might see a housing bubble in the next few years, no one has asked the question: When will Australian house prices crash? Continued low-interest rates and a construction boom should help to insulate the market.
However, our own local research might not be enough to convince you so we rounded up the views of some of Australia’s property economists for their predictions for property in 2021.
Reserve Bank of Australia
According to governor Philip Lowe of the Reserve Bank of Australia, ‘house values could jump 30 per cent over three years if borrowers believe the cut in interest rates is permanent’. As the RBA has guaranteed no rate rises until at least 2024, it’s a great time for buyers to lock in mortgage interest rates.
What economists are predicting
While over 2020, many bank economists made overly pessimistic predictions, the reality was far different.
Finder each month surveys a panel of 40 economists for the RBA cash rate survey. For 2021, 86 per cent of economists expect that property prices will fully recover to above 2019 levels.
Few property economists made accurate predictions but HSBC’s chief economist Paul Bloxham came closest, being within 1 per cent of actual prices. For 2021, Paul predicts growth (although lower than for 2020) with price rises of up to 4 per cent only, nationally.
State capitals with high demand and less stock will benefit: Sydney prices are expected to rise from 2 per cent to 6 per cent. In Melbourne, expect to see up to 5 per cent and the same in Brisbane.
While Westpac had a gloomier scenario for 2020, their analysts are painting a much rosier picture for the next couple of years, with chief economist Bill Evans and senior economist Matthew Hassan expecting 7.5 per cent rises for 2021 and 2022 – a cumulative rise of 15 per cent.
CommBank is seeing home lending increasing after most people who took mortgage holidays and paid back loans, which meant that a flood of distressed mortgage homes didn’t hit the market.
CommBank Senior Economist, Belinda Allen, is optimistic given data showing a strong recovery and lending up 59% since May (ABS data). CommBank is on the top side of optimism, tipping a
a 9% lift in house prices in 2021 and a 5% rise for apartments.
Global investment bank UBS remained upbeat about house prices throughout 2021 and now agrees that we could expect house prices to rise by 5-10 per cent year on year. UBS analysts see a risk of 10 per cent plus (that could lead to a housing ‘bubble’ again, and stimulate inflation) given the potential repeal of responsible lending.
I’m sure you’re all familiar with AMP Capital chief economist Shane Oliver, whose pronouncements on property appear regularly in the media. Dr Oliver predicts home prices will surge by 5 per cent nationally in 2021, although apartment prices, especially in inner Melbourne, remain weak.
Low-interest rates, buyer incentives, potential easing on lending restrictions, reopening of the Australian economy and slight improvement in employment figures should all help prices trend upwards into 2022.
SQM Research’s Louis Christopher is one of the more reliable predictors of house price changes. SQM’s property price index is an excellent tool for tracking movements.
Need help with buying or selling property in 2021? Give us a call today.