Five of Australia’s eight capital cities are on course to experience double-digit house price growth in 2021, according to Propertyology.
The national buyer’s agency and property research firm believes record-low interest rates and limited supply will outweigh the negative effects of weak population growth and cause another housing boom.
Propertyology forecasts house prices to rise by more than 10 per cent in Brisbane and by more than 15 per cent in Perth, Canberra, Adelaide and Hobart, while rising between 5 and 10 per cent in Sydney and Darwin, and falling by less than 5 per cent in Melbourne.
“Contrary to the opinions of a cast of thousands, population growth has always played a relatively small role in property price growth,” Propertyology head of research Simon Pressley said.
“Property is shelter, an essential commodity, not an ‘index’ on a bean-counter’s computer screen.
“It is a fact that Australia had a national shortage of shelter available for sale and for rent immediately before COVID-19.”
Mr Pressley said low housing supply and easy access to cheap credit “will be the rising tides to lift all ships”.
He flagged concerns about the potential impact of the months-long lockdown in Victoria, but said overall conditions were stronger than at any point since the turn of this century.
“All things being equal, Australia has just commenced an era of accelerated rates of home ownership and wealth creation in a manner not seen since the 5-years ending 2005,” Mr Pressley said.
Released on December 1, the latest available data from CoreLogic revealed that national median property prices rose by 0.8 per cent in November.
Prices rose in every capital city over the month – even though Victoria only ended its lockdown in the last week of October – with analysts attributing the rise to government incentives, limited supply, and record-low interest rates.
Since then, however, CoreLogic has released its analysis, one that calls into question the sustainability of Melbourne’s house price boom.
“The inner-city Melbourne market is seeing greater risk in 2021, with an increase in [listed] stock weighing on a recovery in values,” CoreLogic head of Australian research Eliza Owen said after the release of the research firm’s Best of the Best report for 2020.
“For example, modelled sales volumes for November estimate 4301 transactions took place across Melbourne, compared with 8054 new listings added to the market in the same period.
“This means there was around 0.5 sales for each new listing added.
“This is very different from conditions across other capital cities, where the November sales-to-new-listings ratio averaged 1.2 sales for each new listing added.”
Regulators watching closely
Ms Owen added that Australian regulators could intervene in the market if soaring property prices saw household debt rise too quickly in 2021.
“At June 2020, the housing debt to income ratio was 141.2, with housing debt accounting for most of Australian household debt,” she said.
“This poses an ongoing risk to the Australian economy, especially where heavily indebted households may be more likely to save rather than spend during periods of uncertainty or economic hardship.
“As a result, policy makers and regulators may watch for signs of rising household debt, or a decline in prudential lending standards that could lead to higher household debt.
“Higher LVR lending or higher loan to income ratios could be a trigger for macro-prudential intervention in 2021.”
Propertyology’s key predictions for 2021
- House prices to rise by more than 15 per cent in Perth, Canberra, Adelaide and Hobart
- House prices to rise by 10 to 15 per cent in Brisbane
- House prices to rise by 5 to 10 per cent in Darwin and Sydney
- Melbourne will have a good first quarter but face challenges after that. Over the year, its house prices will fall by less than 5 per cent
- The apartment market will struggle in every major city (apart from Hobart).