Australia’s residential real estate market seems to be turning around amid the COVID-19 pandemic after housing sales and prices had declined from March to September.
The sales statistics in November are pleasantly surprising, recording a 0.8% rise in housing values.
According to economists, the housing market will potentially overcome the impact of COVID-19 by early 2021 as prices continue to grow across Australia.
According to corelogic.com.au, the average home price in Australia has risen by 0.4%, with Melbourne and Sydney witnessing a rise in prices too, up 0.7% and 0.4% respectively.
According to industry experts, some vital factors are playing an integral role in helping the residential property market to remain buoyant even amid the global health crisis.
These factors are:
- RBA’s low mortgage rates
- Increased demand from first home buyers
- Excellent response to combat COVID-19 transmission
- Businesses reopening and contributing towards boosting the economy
- Addressing the unemployment threat with mitigation of job keeper
“Buyer demand is mostly being fuelled by a surge in owner-occupiers rather than investors, looking to take advantage of historically low-interest rates, generous government incentives and an increased state of normality.”
Tim Lawless, the Head of Research at CoreLogic
So, keeping in mind Australia’s slow-paced yet positively growing real estate market, here are the emerging trends that we could see in 2021:
1. Growing Interest of First Home Buyers
We’ve seen the introduction of the First Home Loan Deposit Scheme(FHLDS) in January 2020.
This scheme allowed first home buyers to purchase a property with a 5% deposit without paying for Lender Mortgage Insurance, which can save them up to $10,000.
The popularity of the scheme is apparent with it’s 10,000 introductory spots being filled up within a few months, causing another round of 10,000 spots releasing in July.
On top of the FHLDS, let’s not forget the changes introduced in the Homebuilder program on 29 November 2020.
The changes awarded a $15,000 grant for first home owners to build or do substantial renovations to their homes and this can be applied together with their First Home Owner Grant.
Furthermore, housing prices are increasing but at a much slower pace and this trend is projected to continue in the next one-two years as well.
These factors have sparked the demand for a residential real estate property, especially among first home buyers.
2. Expect More Millennials to Invest in the Residential Property Market
Australia’s real estate market is poised to see more investments from the millennials in the years to come.
Young investors, in their 20s or early 30s, have a steady income flow and better-off managing their funds. As such, they aren’t just a good prospect for banks and lending institutions but they can also afford homes.
They are more inclined to have their own home rather than renting.
Most millennials in their early thirties are planning to get married and have children. And this further drives their desire to buy a home.
3. Improved Investor Sentiment
According to economists, Australia has witnessed strong gains in financial and housing markets over the September quarter.
This has caused the household wealth to hit a new all-time high of an average of $441,649 per person.
An increase in household wealth would naturally mean an increase in buying power as well.
Furthermore, the share market is recovering from its record low from March to September.
All these factors are steadily transforming consumer behaviour and will bring a positive outlook towards the residential property market.
4. Modern Selling Strategies to Keep Pace with Technology Advancements
Technology advancements and the proliferation of the Internet have reached such levels that interested homebuyers now search online portals to browse properties before even consulting a real estate developer.
There are several trusted online portals where one can view and learn about residential properties in their preferred regions and then make an informed decision.
This trend has gained momentum after the coronavirus pandemic when people have restrictions on moving out of their homes.
In terms of new development in selling strategy, the pandemic saw the adoption of online auctions as well as 3d look around functions in property portals.
These allowed potential buyers to browse the entirety of the house without leaving the comfort of their chairs.
Since the health crisis is yet to fade out completely, more and more potential homebuyers will turn online to browse residential properties in Australia.
As such, experts believe that we will see newer selling strategies from realtors and property owners, with the focus on educating the customers via technology and not face-to-face.
This is a great way of attracting potential buyers in their early stages of the buying cycle.
5. Banks are Keen to Lend
The demand for residential real estate property continues to grow since October, banks and lending institutions are showing a keenness towards writing new business.
This is apparent when the Reserve Bank of Australia has set the official cash rate at the lowest 0.10%, showing that they are ready to lend more and this is a positive aspect for the housing market.
Furthermore, bank loan deferrals are also falling and there is no chance of forced or avalanche mortgage sales as most homebuyers were worried about.
This will further boost interest among potential buyers, driving the growth of the residential real estate market.
Conclusion
The housing market is an integral element of the Australian economy and the above-mentioned trends indicate an optimistic future for the residential real estate sector.
We see factors such as lower mortgage rates, increased interest of first home buyers and declining bank loan deferrals are pointing to a positive environment in the real estate market this 2021 and in the coming years.
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