In 2021 Australian house prices rose at their fastest rate in more than 17 years.
As the world navigates its way out of the COVID-19 and we embrace the silver linings that have risen from the pandemic, the value of the Australian property market continues to shine.
But what lies ahead?
What changes to the way we live, work and play have on the property market?
And where do we see the opportunities for investors, buyers, and sellers across the East Coast of Australia?
Real estate doyen John McGrath answers some of these questions in the recently published 2022 McGrath Report
Here’s how McGrath introduces this year’s report…
Where do I start in trying to unpack a year that has literally been like no other in our history?
The first question we must ask is, “Despite being in the midst of one of the greatest social and economic challenges in recorded history, why is the real estate market in Australia performing so strongly?”
As counter-intuitive as that reality seems, there’s little doubt that most markets around Australia are experiencing very positive conditions, which have lifted most values to record highs.
So, what are the drivers behind this surge?
I think the elements that are buoying this market are several layers deep and include economic factors as well as strong human elements.
Let’s look at what I believe are the top four drivers:
1. Record low-interest rates.
We have never seen money so cheap to borrow in this country and it’s looking like the current low rates are here to stay for years to come.
Globally, interest rates are locking in at these levels for at least five years, so first home buyers, upgraders, and investors are taking advantage of them.
2. Whether it’s upgrading their current home or buying an investment property, most Australians seek the comfort and safety of bricks and mortar in difficult times.
So, the sleep-at-night factor that property delivers combined with the aforementioned cheap money has driven millions of Australians to invest or invest further in residential property.
3. Low stock levels mean demand is far outstripping available supply.
Until we see a return to a more normalised level of properties for sale, we will continue to see overweight demand pushing prices higher.
Even with record-high prices, many sellers are fearful of getting out of the market before their next destination is found.
So, with everyone waiting for their dream home to come along before they go to market, we find ourselves in an unusually low listing environment.
Again, somewhat counter-intuitive.
4. When a share market or property market runs like this, we usually see a large amount of FOMO (Fear Of Missing Out) engulfing society, meaning, “if everyone else is buying or upgrading their home then I should too” – fearing they may miss out on the gold rush.
NSW derived just under $10 billion from stamp duty last financial year, making it the state’s largest taxation revenue source.
Put simply, stamp duty revenue has been a saviour for most governments around Australia and they will do whatever they can to keep the property ball rolling.
So, we will continue to see governments do whatever they can to keep the property market open.
In 2022, when things (hopefully) restore to a more normal state and borders reopen, I believe we will see significant investment into Australian property from expatriates as well as overseas immigrants and investors.
COVID-19 has only reinforced the good fortune that we all have living in such a huge and somewhat remote country.
Historically, most of these funds find their way into the Sydney and Melbourne markets, however, with the recent Brisbane Olympics announcement, I suspect South East Queensland will also be a strong recipient of this overseas investment.
Whilst the inner suburbs of metropolitan markets (especially the bigger cities) will remain entrenched at the top end of the market, proximity to the city is becoming less valuable for many over lifestyle.
This is because many people have now found that their daily trek in and out of the city is no longer necessary, courtesy of telecommuting, and many have decided to move to their dream location now rather than waiting until they retire.
Fringe areas are already huge beneficiaries, like many inner-city dwellers eye off the enviable lifestyle available 20-30km further afield in areas where value for money compares favourably with the trendy inner urban environment for young families and empty-nesters alike.
The same can be said for lifestyle locations (read treechange and seachange) within two hours of major hubs.
The human race is an amazing collective of talent and inspiration.
I know that together, we will help each other move through the tail end of this challenge and on to new and exciting beginnings.