With the economy taking a brutal beating this year, many Australians have been sitting cautiously watching and waiting to see what the impact will be on the property market before making any big moves.
How will the market respond in terms of property prices and buyer appetite as many households navigate changes in their personal circumstances at the mercy of COVID19? I know, many of you are thinking that if this year has taught us anything it is that you almost need a crystal ball to predict the future, but based on years in the game and some pretty solid market indicators, here are my trends I think we need to watch for and some tips to help you navigate the market in 2021:
TREND: Historic low interest rates mean buyer confidence will increase
In a bid to bolster the economy through the current crisis, the RBA has slashed the official interest rate to a historic low of 0.1%. With the Reserve Bank adding that they don’t anticipate seeing rates increase for at least the next 3 years, the carrot has officially been dangled for potential buyers. Low interest rates like we have now means borrowing has never been cheaper and should give all categories of buyers the confidence to jump in.
Motivated by high clearance rates and extraordinary sales results, vendors will have more confidence to list their properties too, meaning there will be a slightly higher number of transactions in the near future.
TREND: Aussie expats are buying to move home
Aussie expats are now looking for that safe haven option to return home and build on a new life here. COVID is bringing these people home due to uncertainty and the need to be back home feeling safe again. The majority of expats I work with are young families that are looking to buy in areas where their kids can grow up and go to school and they are willing to pay top dollar for these homes.
These expats are hiring buyers agents to represent and guide them through auctions and purchases. From my perspective, we are their eyes on the ground, so to speak. We use a multitude of platforms to enable clients to have the confidence to buy remotely.
TREND: The housing market will still remain undersupplied though
Whilst we are anticipating growth in the number of properties to hit the market in the early months of next year, those looking to buy may still find the market a little slim in most in city/metropolitan areas. I foresee that the continued high demand for properties will continue outstrip the supply of houses. This means that where there is a shortage of houses on the market, auctions will continue to yield exceptional results for quality stock and exceed asking prices, which is exactly what I am seeing right now.
Due to the historic low interest rates, buyer confidence is high, however vendors are hesitant to put their properties on the market because there’s nothing out there for them to buy. A large number of the sales that are happening right now are people that are leaving the Sydney or capital cities of Australia altogether, and so don’t have to worry about undersupply of stock and pressure of buying a new property in the city.
TREND: Purchases will be more based around functional uses of homes due to COVID
For many Australians, the motivation for buying a home next year will change from what it once was. COVID has taught us that home is our safe haven and is associated with family and comfort now more than ever. This means that buyers are wanting more from their property. The pandemic has highlighted what functionality in the home they really need. Features such as a home office and a space for the kids to learn at home have become essential. For many families these “nice to haves” are now firmly on the “must haves” and are non-negotiable aspects of their purchase. The benefit of low interest rates mean buyers are willing to stretch their spend to secure these dream homes they are looking for. There is also an increased focus on outside spaces. Inner city suburbs are really focusing on green spaces around them such as community gardens and parks and those further out are keen to secure homes with a backyard, or at the very least a courtyard.
TREND: 2021 will be a vendors market
Competition to secure property will be high next year meaning that buyers will need to be on the front foot – this puts vendors in the box seat. Buyers will be looking to connect with properties on an emotional level more than ever before and the fear of missing out on “the one” can lead to purchasers overpaying for property. Overpaying in prices though is (surprisingly to some) driven primarily by the empty nesters. They are leaping at the soaring prices offered to them for their family homes leaving them with a healthy sum of cash available to them to spend on their new property. Vendors know they are in a position to hold on and secure their price – this will have a large influence on why we will not see prices drop for houses in 2021.
TREND: Quality Apartments will still sell well
Prices have gone up for houses and some suburbs have even gone up by 20%. This is predominantly driven by the lack of supply of homes. In the apartment market, this is not the case. There is lots of apartment stock on the market and there are less apartment ‘buyers’ out there.
This means that, if you are looking to buy an apartment as a first home buyer, downsizer, empty nester or an investor, now is the right time to buy. As long as you do your due diligence and only look for quality stock, you’ll find there are some really good opportunities.
Buyers are shying away from newer developments and turning to red brick, older apartments due to the integrity of the build of the apartment blocks. To that end though, this means there’s a slight shortage in this part of the apartment market because they’re in high demand.
There are plenty of options to buy ‘newer’ apartments. If you are interested in such properties, you must ensure you get a full understanding of the quality of the build and the commitment from the strata committee and owners to maintain and run the complex.
TREND: 2021 is the year for investors
As more apartment stock comes on the market, seasoned investors will continue to shop; off loading the sub performers and upgrading to better quality investments to add to their portfolios. The interest rates are well and truly palatable and many first time investors are keen to jump in and reap the benefits. With houses out of the question in major cities for many mum and dad investors units and their new price tags will be appealing.
TREND: More parents will be helping their children
The higher property prices go, the more money you need to save for a deposit. The last couple of years of property price growth had seen many first-time buyers lament that they would never be able to save what they needed to get their foot in the door. In many cases, these youngsters were often turning to the bank of Mum and Dad to help them get over the line. Whilst 2021 may see our property prices hold tight, parents will see this as the ideal time to help their children into the market. The First Home Loan Deposit Scheme has been extended to another 10,000 buyers from October allowing some first home owners an opportunity to enter the market with just 5% down and be LMI exempt – a deal that is appealing to the kids and parents alike, many whom float their children a portion of their deposit to get them started.
TREND: Escape homes outside of the city
Our ability to work remotely this year has many Australians realising they really can be based from any location and still work. In a market that was primarily designed as a lifestyle choice, the humble holiday home will make a resurgence as we set up alternate hubs to both work and play from. Tree changes and sea changes have also become more efficient and more cost effective, meaning these too will be on the rise.
INSIDER TIP FROM A BUYERS AGENT: Chicken and the egg game – buy first rather than sell first, if you can
It is the age-old problem – juggling the sale of your current property and purchase of your new home almost simultaneously. Financially, many people rely on the proceeds from the sale of their home before purchasing another so I completely understand if from a money point of view, it isn’t really an option for you. For those who are in a strong financial position, the market movement is favouring vendors so you don’t need to be afraid that you will buy your new home and then be stuck sitting on your current property – provided you currently own a quality home, it is unlikely that will be the case. Conversely, considering how in demand property is, you are better off having time on your side when it comes to buying – it is competitive out there and you might find tying down your next home a little harder than you anticipated.
By Michelle May, founder of Michelle May Buyers Agents