The Delta strain has forced millions of residents around Australia back into a snap and extended periods of lockdown. In some states – like New South Wales – residents have been subject to multiple and extended lockdowns. Army troops were called upon to enforce important and necessary health orders in certain government areas.
During and shortly after the first few lockdowns in 2020, the value of residential property declined by only 2.1%, and the number of properties listed for sale as well as actual sales declined during this period. However, the market made a quick and sharp recovery by October 2020.
Many people are now wondering, will the 2021 lockdown slow down the Australian property market? Investors, homeowners who planned on selling and prospective buyers are all intently watching the market; for any signs of a lockdown slow down that could change the trajectory of dwelling prices.
The NAB Quarterly Australian Residential Property Survey for Q2 2021 saw housing market sentiment reach a record high of +71 points. This record high is up from the quarter one sentiment of +69 points.
According to the property survey; “NAB has also upgraded its forecasts for dwelling prices – now expected to grow around 19% in 2021 and 4% in 2022. [Given that] the better than expected recovery in the economy and labour market alongside very low- interest rates has supported the strong rebound in the property market”.
NABs upgrade in the projected price increase – from 14.1% to 19% – also take into account record-breaking price growth, surging median house prices and fast economic recovery from the slight downturn in 2020. All of these trends have combined to boost market sentiment, particularly in Northern Territory and Western Australia. Australians seem to feel more optimistic about the property market in this quarter.
NABs research also found that first-home buyers were leading the pack in new property purchases. However, NAB also suggested that; “…government incentives have been only ‘moderately’ significant in helping [first-home buyers] get into the market earlier, led by VIC. Rising house prices have had a bigger (negative) impact, particularly in NSW”.
Investor activity has increased quarter on quarter in 2021, up from 16.8% in quarter one to 18% this quarter. Tim McKibbin – CEO of Real Estate Institute of NSW – found that agents are still confident and demand remains high, but supply levels are still low. Demand has been so strong that some online auctions have smashed their reserve price, with some buyers snapping up properties after only a virtual walkthrough.
“For the medium term we can expect prices will be buoyed by the strength of demand… pace of price growth may be easing but it remains to be seen if the Budget outlook that tips house prices will peak at the end of the year will prove premature”. McKibbin adds.
The Reserve Bank of Australia (RBA) announced that it would be holding interest rates at 0.1%. The committee remains committed to supporting the Australian economy through the Covid related downturn and has remarked that; the economy is recovering better than initially expected, although the initial contraction was the worst since the Great Depression. Concerns remain about the infection rates that continue to soar in some areas and the uncertainty around containing the virus in the short term.
The committee also feels that government initiatives will play an essential role on the road to full economic recovery. “The Australian Government’s recent announcement that various income support measures will be extended is a welcome development and will support aggregate demand. It is likely that fiscal and monetary stimulus will be required for some time given the outlook for the economy and the labour market”, says RBA’s Governor Lowe.
Shane Oliver – Chief Economist at AMP Capital – maintains that prospective sellers are merely waiting out the lockdown before listing and; buyers will jump back into the market after auctions and inspections are permitted to resume. This delayed gratification, combined with rock-bottom mortgages – in his opinion – will see dwelling prices continue to rise.
Many experts appear to agree that a loss of momentum is to be expected, given the recent lockdowns. Especially; in Victoria – which has gone through multiple lockdowns – and NSW where the infection rates have proven difficult to contain. When the virus is eventually contained and the restrictions are eased, the consensus is a swift rebound of activity and prices are likely.
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