In this week’s market update on the Property Planner, Buyer and Professor Podcast, the team analyse the factors playing out in Australia and abroad that are shaping our economic recovery and property market growth, as Dave, Cate and Pete take you through:
- All aboard as the last of the big banks revise their property forecast UP for 2021! ANZ is the last of the big 4 bank dominos to fall, and revise up their previous gloomy 2021 predictions for the property market. As we shared in April, we expected the market to fall by less than 5% and in early October we predicted 10% + growth in 2021, and more to come in 2022. Now the banks and other economists have adjusted their views.
- The peak to trough fall in values from Covid well within our predicted 5% band. The impact of the Covid pandemic on property values from peak to trough was a modest decline of 1.7% for the entire Aussie property market and 2.8% for capital cities. CoreLogic data tells us that the Melbourne market bottomed on Oct 18 and the Aussie market a week earlier. In the Podcast we called the inflection point in late September due to data lag. Once again, many analysts have egg on their face, predicting cataclysmic price falls. Perhaps we need to have a Podcast on why macro- economic experts still do not understand the true drivers of the residential property market!
- The Melbourne property market has joined the party. Melbourne property values are surging with CoreLogic showing growth in values since mid to late October, auction clearance rates surpassed Sydney on the weekend and all signs point towards a larger recovery, because of the larger fall and Melbourne was on a tear leading into Covid. This has been playing out at the coal face since the start of October.
- The kiwi property market, a look into our future? The New Zealand government went hard and fast locking down to stamp out Covid. The effective eradication of the virus along with significant stimulus and with interest rates has resulted in median property values rising a whopping 11.1%! This trajectory means that the Reserve Bank of NZ is talking about macro prudential measures, such as restricting LVRs to slow down the property market already. We have predicted this kind of intervention will be on the cards for Australia towards the end of 2021 or into 2022 as APRA has proven it works.
- We explain some key reasons why we predicted property values would surge. For starters, debt serviceability is the lowest it has been since 2001. Interest repayments as a share of total household incomes are the lowest they have been since March 2002. The Australian property market has provided zero net capital growth for about four years now. The unfortunate reality is that despite so many people having such a difficult time, many of them were young people in part-time and casual work and not on the property ladder. A larger cohort of people have the greatest level of savings on record and benefited from stimulus which they can now deploy in investments.
- The repeal of ASIC’s Responsible Lending obligations is looking increasing likely! At the AFR Banking and Wealth Summit during the week, treasurer Josh Frydenberg ratcheted up the pressure on regulators to ensure they played their part, which acting ASIC chairwoman Karen Chester indicated she had heard loud and clear. The ASIC chairwoman painted the picture of a clear pivot of ASIC’s position and it provided another sign that the Morrison government will ensure that the recovery is not hampered by lack of access to credit.
- Why property value increases will not be halted by the end of JobKeeper and loan repayment pauses. The trio explain the critical drivers that will continue to put upward pressure on values.
- Explain why the latest cash rate drop was not about reducing interest rates for borrowers. While the low-rate environment is doing wonders for our debt=to-income ratio, it’s not the primary reason why the RBA has been steadily lowering rates. The Property Planner, Buyer and Professor explain the real reason behind the rate cuts which are primarily about keeping our exchange rate lower and creating jobs which are more important than focusing, or worrying about excessive inflation.
- Banks forecasting an ever-improving positive outlook for GDP and unemployment. Government stimulus, our proven ability to suppress Covid, successful vaccines, the property market in full rebound mode and the expectation of record-breaking internal tourism all points to updated forecasts for superior GDP growth and reduction of unemployment in 2021, with one major back predicting unemployment to be as low as 5.75%.
- We touch on the big news in the NSW budget, with the plan to make stamp duty optional. We take a high-level look at this potential transition from stamp duty to a yearly tax on property and our hosts provide some different perspectives on what this could mean, but it is only early days yet.
- Listen to some of our predictions back in April and May. For perspective, we suggest that you listen to our market updates during the early stages of the Covid pandemic where we discuss why a downturn is usually the best time to buy property and a number of the factors that we expected, and have, played out now because history may not repeat, but it sure does rhyme!
- Market update #5 – The green shoots – what are the early signs of market recovery?
- Market update #6 – Getting your ducks in a row before the economy opens up!
- Market update #7 – Recovery lessons from recent recessions, the great depression, GFC & Spanish Flu – the market forecast
- And of course, our ‘gold nuggets’!
David Johnston- The Property Planner’s Golden nugget: if we do see significant price rises that we expect, and just picking up where the property market left off leading into Covid, we had seen price increases of around 10% particularly in Melbourne and Sydney, we’re likely to see macro prudential APRA intervention to slow it down again, it’s now proven that it works, and that was one of my predictions at the start of this year, that we would see it at the end of this year, but I didn’t predict covid – so I think we’re likely to see that at some point at the end of 2021 and 2022. And it’s worth noting that net property values when compared with CPI have not increased on average across Australia for 4 years, so that’s also another reason why we will see property growth.
Cate Bakos – The Property Buyer’s Golden nugget: relates to understanding a property’s likely selling price and not making a rule of thumb estimate when you look at a quote range, because every agent, agency and property has its own unique set of background reasons for a price quote, occasionally you’ll purchase a property within the quote or at the base of the quote, so you need to understand is it an auction quote, is there a chance that it’s underquoted, is it a low reserve because the vendor is confident. These things need to be ascertained, and you can ask agents the questions and do your own research just on the sold tab as we’ve chatted about in past podcasts.