Now that we have all put 2020 behind us, it seems Australians in general are keen to move forward. And, as a nation, we’re not sitting idle waiting to see what happens. In fact this year, market activity has ramped up much earlier than it normally does post the Christmas/New Year period with strong early sales volumes. In the first 4 weeks of 2021, the number of properties sold was 28.2% and 38.2% higher than the same period in 2020 and 2019 respectively.
With such great momentum so far, below are the top 5 questions and answers to consider for the first half of 2021.
1. How strong will sales volumes be?
We are certainly off to a promising start for a strong first half for residential property sales. However, the way this pans out will be dependent on properties being listed for sale. You can’t transact property if there is nothing to buy. In other words, for sales volumes to reach their potential, we need more listings to be made available. Right now, demand far outweighs supply.
2. Will more owners start to realise the benefit of listing now rather than waiting?
While there were plenty of good reasons for property owners to hold off making any major decisions – like selling their property, – during most of 2020, that is not the case now. Experts are predicting that owners will wake from their indecisiveness and this means we will begin to see a greater balance between supply and demand. This will result from owners feeling more confident due to a combination of record low interest rates, strong buyer demand and rising property prices. In Perth, we are currently Australia’s fastest growing major market.
3. What will happen with the rental market?
There is no question that the rental market struggled in 2020. Typically, the first quarter of any year is the strongest in terms of rental demand and price growth. However, given that this is largely driven by new arrivals from interstate and overseas, things will be quite different this year due to border restrictions. The story is somewhat different in Perth as we have a severe rental shortage. According to CoreLogic’s Quarterly Rental Review (December 2020 quarter), Perth was the fastest growing rental market in 2020, which is a trend that is continuing into 2021 with reiwa.com data revealing Perth’s median house rent increased by $5 to $400 per week in January. Investor numbers are expected to increase in Perth, but probably not until the second half of the year.
4. Will HomeBuilder be extended beyond March?
The Federal Government’s HomeBuilder stimulus has been highly effective in encouraging first homebuyers to purchase and stimulating activity in the construction sector. Since it was introduced, more than 75,000 people applied for the grant of which 80% was for new builds and 20% was to renovate. Initially supposed to end in December, the grant has been extended to March, although the value of the grant has been reduced. For the grant to be extended beyond March, a number of factors would be considered, including the state of the economy, international borders and the COVID-19 vaccine rollout. Tradies and developers would no doubt be hoping for an extension as so far it has served them very well.
5. Will we see a spike in mortgage defaults as stimulus payments are wound back?
At the height of the pandemic in May 2020, 11% of all mortgages in Australia were on deferred payments. This fell to 3% in November. Meanwhile, for many mortgage holders, repayments have continued to be supported by JobSeeker and JobKeeper payments. As both are being gradually phased out, it is possible that we will see an increase in the number of mortgage holders struggling to make payments. Unless the government assists with some additional targeted support packages for those working in struggling sectors, we may see an increase in forced property sales this year in Australia.