- Part 1 summary of research and commentary on Australia's current housing boom
- Summary piece on major statistics, insights and developments in Australia's housing boom
- Includes data from NAB, CBA, CoreLogic, and SQM Research
Australia faced tough economic conditions since the spread of COVID-19 in early 2020.
In particular, real estate businesses were preparing for the worse that the pandemic would hit the property sector particularly hard.
But while commercial real estate slowly rebounds due to a reconfigured workforce, the residential market has been especially buoyant.
Real estate businesses can look back on 2020 with a sense of relief.
“The housing market has really held up a lot better than most people, including us, expected at the start of COVID,” observes NAB Head of Behavioural & Industry Economics, Dean Pearson.
“And that’s despite the fact that we’ve seen really some quite significant challenges, including slower population growth and a weaker labour market.”
The purpose of this article is to summarise the key report findings, commentator insights, and important developments over the past few months looking at Australia’s booming housing market.
Key data insights
Much of the research conducted by major industry bodies have continued to show an upward trend in residential housing prices.
Data from the Australian Bureau of Statistics (ABS) affirmed CoreLogic’s data a few weeks later, with their Residential Property Index showed housing prices have risen across all capital cities.
Meanwhile, NAB’s Quarterly Australian Residential Property Survey Q4 (released in February of this year) saw housing market sentiment ended 2020 on a survey high of +45 points, up from a low of -33 points in the second quarter of that year. They predict around 8% housing price growth in 2021 and a further solid rise of 6% in 2022.
The Commonwealth Bank of Australia‘s Household Spending Intentions Series for January 2021 showed an increased interest in home loan applications and more general home buying behaviour. CBA’s economics team has forecast an 8% rise in residential property prices this year.
RiskWise Property Research’s quarterly ‘Risks & Opportunities Report’ released in late February found that there has been a noticeable improvement in buyer confidence, attributing government stimulus as a key driver in improved consumer sentiment and revitalised demand for housing.
In fact, loan commitment values have continued reaching record highs according to the ABS, in March reaching the eighth consecutive month of growth.
Furthermore, SQM Research found auction clearance rates have climbed to record highs since 2010, recording an 84.8% clearance rate in February (with a staggering 17 suburbs across Victoria alone clearing 100% of listings).
So far, 2021 looks to be a very busy year for residential housing.
What commentators and industry bodies are saying
Adrian Kelly, President of the Real Estate Institute of Australia brings his analysis down to good old-fashioned supply and demand.
“There were far fewer properties available on the market, so that was keeping prices steady.”
REIWA’s President Damian Collins remarked he expected to see Perth property prices rise 20% to 30% over the next few years.
“This would only be getting back to what it was in 2014,” he cautioned, “as we’ve come off 73 successive months of a downturn, where prices fell 20.9%.”
Master Builders Australia’s chief economist, Shane Garrett attributes the record value of loan commitments to the continued rollout of the HomeBuilder grant scheme earlier this year.
In his opening statement to the House of Representatives Standing Committee on Economics, Reserve Bank of Australia’s Governor, Philip Lowe said there were “many moving parts”, including record-low interest rates, large government incentives for first home buyers, the slowest population growth in over a century, very high rates for home building, and a shift in homebuyer preferences towards houses and regional locations.
With booming house prices, Shane Oliver, AMP Capital’s chief economist, advises that a gradual and careful approach to reopening borders would be necessary.
“The best ways to make Australian housing more affordable are to limit the return of immigration to enable housing oversupply to build up and to reinforce the pandemic in encouraging people to relocate from expensive inner-city areas to more affordable suburbs, cities and regional centres.”
CoreLogic’s Head of Research Asia Pacific Tim Lawless and property commentator Gavin Hegney said the housing boom still has a long way to go.
“You may think things are a bit silly, with 50 to 100 people through a home open and five or more offers per property, but we’re not yet at the silly stage.”
Professor Steven Rowley from Curtin University commented:
“Low-interest rates and readily available finance have been major contributors to the strong price rises we have seen in the last couple of months.
“In addition, a surge in population growth in many areas due to people returning from overseas and interstate, many of which have the resources to buy, has added to demand pressures on top of growing confidence among first home buyers, in part fuelled by the COVID-19 homebuilding incentives.
“No doubt investor interest will grow in the coming months as prices and rents rise in many areas. Demand has increased very quickly but supply has been slow to respond hence the big price rises.”