Feeling hot, hot, hot!

In 2021, we’ve landed smack bang in the midst of an extraordinary crackerjack of a real estate market. One that no one anticipated, and one that is contrary to many 2020 COVID-19 doom-and-gloom predictions. The descriptors keep coming – unprecedented, red hot, gangbusters, booming, and – not quite so positively – a property bubble.

So how did we get here? What are the recent factors that have influenced the market? And what is a property bubble?

According to CoreLogic, during the month of March 2021 house prices around Australia rose on average by 2.8 per cent. This is the fastest appreciation since way back in October 1988. In February 2021, Westpac Bank predicted a 20 per cent increase in property values over the next couple of years.

Many factors have given rise to this current Australia-wide property boom:

• Stock levels are low – many people who would now be considering a move are delaying going to the market with their current property because of a lack of stock to purchase when they do sell. A Catch-22, if ever there was one.
• Persistent low interest rates, the lowest in forty years, and reassurances from the Reserve Bank that this will remain the case for the next three or four years, means many young buyers are not afraid to take on substantial debt to secure a home. With mortgage rates hovering around 2 per cent for owner-occupiers, the cost of servicing those repayments is still relatively low, so there is a strong incentive to dive into the market, deep and hard. And that is exactly what these buyers are doing while they still can.
• After a year of sitting it out due to COVID-19, there is a level of pent-up demand and a renewed confidence that the economy is going to keep improving. That confidence translates directly into a willingness to take on home loans.
• Also COVID-19 related is the surge of returning Aussies from around the world, who have now decided finally quit their global wanderings and call Australia their forever home.

According to CoreLogic, APRA, the Australian Prudential Regulation Authority, could introduce measures to dampen prices in the form of regulations to tighten lending. APRA has already cautioned lenders on their exposure to high loan-to-income ratios. The latest data from APRA indicates there is currently no blow-out risk in mortgage lending despite rising property prices across Australia.’

All of which points to a continuing steady increase in property values for the foreseeable future.

Maybe it is the perfect time to take advantage of those record low interest rates and get your foot in the property door, or maybe to upsize and give the fam more room to move. It seems, for now, the only way is up.

If you need any assistance with buying or selling, give Dixon Estate Agents a call. We’d be happy to help.