Attwood Marshall Lawyers Property & Commercial Lawyer, Andrea McGarry, explains why the pandemic has created the perfect storm for Australian real estate.
Auction clearance rates are through the roof, buyer confidence is high, properties are being snapped up before reaching the market, and record prices are being achieved. This is all taking place in the middle of a pandemic.
At the start of the COVID-19 pandemic, economists and housing analysts feared the worst – a total collapse in house prices. Instead, prices in all capital cities have risen over the last 12 months – with even bigger increases seen in regional areas.
Domain’s Quarterly House Price Report showed that for the December 2020 quarter, Australia’s national average house price was $852,940. That’s an increase of 5.8 per cent year-on-year and a dramatic 4.1 per cent lift in just one quarter.
Brisbane’s median house price was $616,387, an increase of 0.8%. With coastal regions like Noosa recording a whopping 18% increase year-on-year with the average house price estimated to be $860,000.
The industry is red-hot and showing no signs of slowing down. Let’s consider the factors that are now leading economists to predict we’re heading for a double-digit house pricing rise.
Why are people ready to buy property now?
Homeownership is a widely held aspiration in Australia, with COVID-19 making many Australians re-evaluate their priorities, living arrangements and lifestyle choices.
With rental shortages a reality and rents predicted to skyrocket this year, more people are enticed to buy rather than rent, which was previously considered the “flexible” option for housing.
According to the 2016 Census of Population and Housing, 67% of people were homeowners and 32% were renters. Understanding the impact of the pandemic on housing will become clearer when the next Census is completed, scheduled to take place 10 August 2021.
- Despite the pandemic, 86% of Australians 18 years and over reported their household finances either remained the same or have improved during February 2021, and 88% expect their household finances to remain the same or improve over the next 12 months.
- Surprisingly, the unemployment rate in February 2021 decreased to 5.8%
- Investors have taken a back seat – since the eviction moratorium, investors have stepped back and this has allowed a more competitive playing field for first home buyers to enter the market
- Interest rates are at an all-time low
- Lenders are hungry for business – there are plenty of offers available and responsible lending criteria has been relaxed
- First Home Owner Grants (and exemptions to stamp duty) are still on offer in addition to the First Home Loan Deposit Scheme, which assists eligible first-home buyers to get onto the property ladder, which remains available through participating lenders.
Having fared better than most countries during the pandemic, more households now have the income to service a home loan, and the deposit to act now, having saved their money during the 2020 lockdown with reduced discretionary spending and limited opportunities to travel.
The sun is shining in Queensland as the perfect storm brews around Australia
The combination of low stock, low interest rates, wage growth and a global pandemic have seen record numbers for property sales, particularly in Queensland. The stars were aligning for a property boom in Queensland before the COVID-19 pandemic, and in the wake of Sydney and Melbourne bearing the brunt of the chaos, the success in the Queensland property market has skyrocketed.
Melbourne lost 10,000 residents to interstate migration in six months and continues to lose residents each month. It appears Sydney and Melbourne residents have realised the appeal of Queensland, and whilst experts are tipping the stock will increase, they also anticipate the demand will be there to see double-digit growth in Queensland.
This has meant that many local buyers are being pushed out of the market as interstate buyers come in droves, offering hundreds of thousands of dollars more than asking price to secure their ideal Queensland home.
For anyone who sold their property last year in Queensland with an intention to re-enter the market, they are simply finding it difficult and unable to afford a home they would have been able to 12 months ago.
The Commonwealth Bank has forecast that Australia’s house prices will rise 16% over the next two years in what they’re calling a housing market boom, and unit prices to rise by about 9%.
Property boom or property bubble?
Finder.com.au recently asked a panel of 40 economists to consider the national property trends and offer commentary on whether what we are currently experiencing is a property boom or bubble. All 40 panellists predict that the rock bottom cash rates are here to stay – at least until the end of 2021. Roughly half of the panellists predicted a cash rate rise to occur in 2022, with the other half not anticipating a rise until 2023 or later.
The panellists were also asked to consider how much of a housing price percentage increase would be required to indicate that a bubble was forming. It is important to note that only 3 of 28 panellists who answered the question, said there was no chance of a bubble forming. The other remaining panellists on average, considered a 23% increase would be sufficient for them to say we are experiencing a property bubble. Despite this, the consensus among industry experts is that prices will continue to rise, and a sudden crash in the market is tipped to be unlikely.
Helping buyers and sellers during a property boom
While buyers may be keen to capitalize on low interest rates, rushing to purchase a property certainly has its risks, and there are many things for buyers and sellers to consider. Much like any other huge financial investment, sufficient planning and preparation should be considered, even amidst the emotional fear of missing out in the current climate.
It is important for real estate agents to nurture clients through the buying process and ensure they make an informed decision. Emotions are running high with many people offering above their budget to secure property and avoid missing out. Whilst it can be tempting to allow buyers to rush into entering a contract, it is pivotal that they are afforded the opportunity to obtain legal advice before signing the dotted line. Our experience has shown us time and time again the vast array of issues that can emerge and threaten to curb a deal because the buyer did not get the right advice before entering into a contract.
Attwood Marshall Lawyers can help
At Attwood Marshall Lawyers, we have the team and systems in place to help people quickly so that they can be supported through the buying process and make an informed decision. We can assist in drafting terms and conditions and reviewing contacts for buyers and sellers to ensure there are no surprises along the way.
As a PEXA certified law firm, we strive to ensure settlement can proceed smoothly and happens on-time.
To avoid risk or unnecessary delays, get the right legal advice by contacting our Property and Commercial Department Manager, Jess Kimpton, on direct line 07 5506 8214, mobile 0432 857 300 or email firstname.lastname@example.org
If you require advice outside of office hours, our Robina Town Centre office is open Thursday night until 9pm and Saturday morning until 12noon, or our team can be contacted on our 24/7 phone line on 1800 621 071.