Analyst identifies 10 emerging trends in the real estate market
Propertyology Research Manager Simon Pressley has identified 10 new trends that will play out in the real estate market over the next five years.
Mr Pressley (pictured) gave his two cents on what he sees emerging as major themes over the next five years in the Australian property market.
“Nationally, the biggest influences on future real estate performance will be the actions of a few key people in high places,” he said.
1. Divergence of the rental offer
According to Propertyology, there is a divergence in rental supply between capital cities and within regional regions, with Sydney and Melbourne having a combined number of vacant rental units of 43,607.
“While Sydney and Melbourne have a significant rental housing surplus, the 15 million people who live in the rest of Australia only had a total of 17,706 units available,” Pressley said.
“There are countless stories of companies across Australia advertising jobs but unable to attract applicants because there is no accommodation available.
“Annual rents have already increased by thousands of dollars in more than 40 Australian cities. The problem will get significantly worse before it gets better.”
2. The legacy of confinement
“Our two largest cities continue to have the most worrying property market fundamentals in all of Australia,” Pressley said.
“With each week that Sydney or Melbourne are stranded, my fears for their future economic health increase.
“Melbourne has already been locked up for more than 200 of the past 500 days. And it seems highly likely that Sydney’s current lockdown could exceed 100 days.”
Mr Pressley also said that current government support, both state and federal, cannot go further.
“It may take a little longer for everyone to fully understand the economic and real estate legacy of frequent blockages,” he said.
3. Regional relocation
“Over the past 18 months, Propertyology has observed an insatiable appetite for open spaces, natural environments and the flexibilities of working from home. The trend towards regional offshoring will continue to accelerate,” Pressley said.
“In the first 12 months of COVID-19, regional Australia saw a net population increase of 44,000 people due to internal migration, while Sydney and Melbourne each saw a population decline of 32 000. “
This has caused what is called a “divergence”, in particular between house prices and unit prices. Regional markets now have some of the most expensive rents in the country.
4. Government debt strategies tested
“The financial statements of each of the Australian state governments will be significantly tested over the next 5 to 10 years. State economies and real estate markets will be affected,” Pressley said.
The latest GDP data show a considerable increase in spending on property transfer taxes, i.e. stamp duties.
5. Interest rates rise sooner than expected
“I won’t be in the least surprised if the RBA starts raising interest rates as soon as the next federal election is over,” Pressley said.
“Any time interest rates go up it will be a good thing as it will be the recognition of a strong national economy and a lot of COVID uncertainties behind us.”
This flies in the face of the RBA’s official message – that rates will not rise until 2024. However, a few leading economists have also predicted a rate hike “sooner than expected.”
In 2020 there were three cuts in cash rates and, according to Pressley, future interest rate hikes could be offset by wage growth, and house prices will continue to rise but at a slower pace.
6. Imbalance of housing supply
“The Australian construction industry was boosted last year at a time when the national population growth rate was the lowest in over 100 years, ”Mr. Pressley said.
“Propertyology predicts that, by 2022-2023, the real estate markets for some larger locations may face oversupply issues.”
The federal government has provided tremendous support to the construction industry in 2020 through initiatives such as HomeBuilder and Small Business Boost, while various state governments have also supported the industry.
For a while, the First Home Loan Deposit Scheme (FHLDS) also only supported first-time home buyers who buy or build. New houses, which some experts have criticized as being too narrow in scope.
7. A more “unhealthy” dependence on China
“Jobs, economic growth, the ability to finance infrastructure, internal migration, vacancy rates and real estate prices in Perth are directly linked to export volumes from China. It is a dependency. very unhealthy, “Pressley said.
About 42% of Australia’s export revenue in 2020-2021 came from China – 81% of that 42% figure came from Western Australia alone.
That said, for real estate itself, foreign investment appears to be an exaggerated phenomenon – the latest ABS loan data shows there was only $ 245 million in loans written to “non-residents.” ”, For an average value of $ 704,310 (graph below).
This pales in comparison to the larger value of loans taken out in July, amounting to over $ 32 billion.
8. Reopening of international borders
“The economic pendulum has indeed moved away from Sydney and Melbourne and further to small capitals and in particular regional Australia,” Pressley said.
“As a result, it is highly likely that a significantly lower ratio of future Australian immigration abroad will be placed in our two largest cities.”
9. Switch from stamp duty to property tax
Mr Pressley said a growing trend among state governments would shift from a stamp duty model to a property tax model.
ACT has previously pitched a version of the idea, while NSW has flirted with it as well.
Opinion: Why stamp duty is the lesser of two evils
10. Tighten lending standards
“Although I think it is less likely than likely that APRA [the prudential regulator] Will bow to growing calls to cut credit again, their track record of dealing with the global consequences is not good, “Pressley said.
“One can only hope that the APRA board of directors does not wish to leave a legacy of economic destroyers and dream breakers.”
However, recent data from APRA shows that home buyers are increasingly borrowing at higher ratios to their income, and New Zealand has already tightened lending standards.
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*Comparison rate is based on a loan of $ 150,000 over 25 years. Please note that the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as withdrawal fees and cost savings such as fee waivers are not included in the comparison rate but may inuence the cost of the loan.