We’re going to wake up in January are realise the property market has been booming for months
Ok, how did that work out for us? 2020 I mean…
The year is almost done. For a while there it was looking hairy. Some economists were talking about prices falls north of 30%.
That looks a bit silly in hindsight, doesn’t it?
But I can understand it. Things were scary. It felt like the wheels were totally coming off.
At any rate, as 2020 comes to a close, it’s starting to look like the property market has come through 2020 practically unscathed.
Nationally, prices are down less than 3%.
Amazing.
How did we do it?
Well lower interest rates certainly helped. As did the mortgage deferrals that stopped a rush of panic sales onto the market.
Those things helped the market keep its head.
And at the end of the day, the property market rode on the coat-tails of the broader economy, which held up much better than most people expected.
And that meant that what happened in your property market really depended on what was happening in your local economy.
Consider the capital city breakdown.
You can see that when it comes to price falls, it’s really a story for Melbourne and Sydney.
Prices were essentially flat in Perth, while they were actually up a decent amount in Brisbane and Adelaide.
(Not a bad outcome given it was the middle of a pandemic.)
Melbourne was obviously impacted by the lockdown, and Sydney was the city most exposed to a slowdown in immigration and overseas student numbers.
And given Sydney and Melbourne account for 60% of the Australian population, and 70% of the housing stock by value, falls there dragged the national averages down.
But the national average actually disguises what’s going on, on the ground. Because really, outside of Sydney and Melbourne city areas, our property markets are all picking up.
Take a look at this chart here, which looks at the distribution of price growth across our capital city and regional areas.
It shows you that price falls have been largely contained to the capital cities, while price gains have been largely concentrated in regional areas (with Brisbane being a bit of an exception.)
So what that tells me is that if you can look through the lockdown in Melbourne, and through the collapse in immigration and student numbers in Sydney, our underlying property market is actually already starting to heat up.
It’s the same story when you compare units and houses. A lot has been made of the fall in rents in our capital cities, but when you break it down, you can see its almost entirely a unit story.
Rents for detached houses are actually up 1.5%!
Again, the apartment market is concentrated in Sydney and Melbourne, and some blocks are entirely dedicated to student accommodation.
So this is consistent.
But the story that emerges for me is that our underlying property market has already turned the corner, and is starting to heat up.
Sydney and Melbourne are lagging the country, and that’s helping to hide what’s really going on.
But if you look through it, the government support packages and record low interest rates are doing their job.
And the property market enters 2021 with a full head of steam.
JG
