Will Property Crash in 2021?
Recap 2020
?Research director for Corelogic Tim Lawless said, 2020 was characterized by a mild dip due to COVID. Property sales slumped 40% in the fisrt half of the year and then rebounded to be up 8% year-on-year over the course of the year after a strong surge.
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?Below is how property prices ended for 2020. This graphic was provided by core logic.
?Housing price growth is more likely due to the massive monetary and fiscal stimulus which saw RBA cash rate fall to its lowest in history. Dr Lowe has stated that he does not expect this to change in the near future and looking out as far as three years. So low rates might support the market for some time yet.But Can You Expect Interest Rates to Stay Low?
?There is no precedence to COVID and the lock-downs. These are the lowest worldwide interest rates in history with some countries central bank implementing negative real rates. It would be prudent to commit to tuning into the RBA monthly meetings to hear direct from the mouths of those that govern rates.
?Regional areas did well compared to major cities basis working from home opportunities brought about by COVID. Demand for less densely populated dwellings went up along with property prices in these areas. Maybe the point to take away is that some housing niches will benefit, while densely populated city areas may not fair so well whilst unemployment rises and lock-downs continue - and potentially escalate!
?Demand for houses has strengthened against units. This is largely due to investor demand weakening as employment prospects disintegrate and banks tighten lending policies. People were less inclined to move into high density dwellings over the COVID period which may extend into 2021.
?The graph below is Corelogic's rundown on change in dwelling values broken down into 3 month & 12 month periods. Only Melbourne City and regional WA entered negative territory, which is very encouraging.
Will rent get cheaper in 2012??Throughout COVID rental yields were pressured lower. As people's employment conditions continue to deteriorate they will be less inclined to increase their rent expense. To counter this, there were less residential dwellings for sale which will keep demand relatively strong for good rental properties.
Will property prices crash in 2021?
?The government has been vigilant in supporting the economy with fiscal stimulus. We will have to wait and see if the Morrison government is happy to continue in the manner it did for 2021.
?Dr Lowe and the RBA have been committed to low interest rates to support the stock and housing market. But have they run out of options? The RBA cash rate is now 0.1% This means the RBA has just 10 basis points to lower before rates are at zero. Dr Lowe has already stated that he is not considering negative rates at this stage. After studying the Nordic countries that have breached sub zero he was unconvinced this would benefit the Australian economy, and actually noted he thought it would cause more problems than it solved.
?The RBA is committed to buying $100 billion in government bonds over 6 months. Effectively an electronic form of money printing, which will have its own problems if abused. We are in uncharted territory and most economic forecasts are simply guesstimates at this point.
?The housing market will still experience an under-supply, thus keeping demand high.
?First Home Buyers might be enticed to get involved at record low rates.
?Government incentives such as First Home Supper Saver Scheme & First Home Buyers Grant will continue to support the market.
?Low interest rates may support the property market in 2021. RBA is committed to low rates for three years as per Dr Lowes statement. Join my Facebook group @mortgagebrokerrevesby for updates throughout the year.
Matthew Stack
www.mortgagebrokerrevesby.com.au
0423 237 242
