Manage episode 285212617 series 1537109
No one expects 2021 to be the same type of rollercoaster ride as 2020.
And while there’s plenty of good news for our economy and our property markets, it’s important to remember that considerable uncertainty remains and the extreme dislocation to many businesses over the past year will take time to resolve.
Now the general optimism is well-founded.
We seem to have this virus “thingy” under control, around 90% of the jobs lost during the pandemic have now been restored – and that’s a tremendous achievement and our property markets are rebounding.
Australia and the world also stand on the cusp of the biggest vaccination rollout in human history, which will only increase the rising levels of consumer and business confidence we’re experiencing.
Sure, the COVID rollercoaster may be slowing, but we still face a bumpy road to economic recovery and that’s what I’m going to discuss in today’s show with Pete Wargent as well as giving you five of my predictions for our property markets in 2021.
Then I’ll share my mindset message with you.
2021 Property Trends
It seems that everybody has been making predictions for our housing markets for 2021 and they’re all extremely positive.
While on the one hand I love to hear this, on the other hand I’m always concerned when everybody thinks the market is going to perform in a particular way as we have seen how wrong consensus opinion has been over the last few years.
So in today’s show I share 5 property trends that I think will occur in 2021 and I’m looking forward to Pete Wargent’s view on these, plus we’ll discuss some economic trends that will influence our property markets.
- Property demand from home buyers is going to continue to be strong.
One of the leading indicators I watch carefully is finance housing approvals, and these are at record levels suggesting that we will have strong demand from owner occupiers and investors in the first half of this year.
Despite the “recession we made ourselves have”, rising unemployment, and many small businesses facing challenges, interest in buying residential property has skyrocketed.
This has come particularly from owner occupiers who have amassed household savings at levels not seen since the mid 1970s, and this is in part because they have not been able to spend their money on vacations or even local entertainment as they normally would.
Now, with borrowing costs lower than they ever have been, the reassurance that interest rates won’t rise for at least 3 years and increasing confidence that we’ve got this virus thing under control, it is likely that buyer demand will remain strong throughout the year.
- Investors will squeeze out first home buyers
While currently there are many first-time buyers (FHB’s) in the market, buoyed by the many incentives being offered to them, I can see demand from first homebuyers fading as property values rise from increasing competition as investors re-enter the market.
You see…typically investors compete for similar properties to FHB’s.
- Property Prices will continue to rise
As always, there are multiple real estate markets around Australia, but in general property values should increase strongly throughout 2021.
However certain segments of the market will still continue to suffer, in particular in the city apartment towers and accommodation around universities. It is unlikely the segments of the market will pick up for some time and the value of these apartments is likely to continue to fall as there just won’t be buyers for secondary properties.
At the same time some rental market will remain challenged. In particular the inner-city apartment markets which are reliant on students, tourists (AirBNB) and overseas arrivals.
- People will pay a premium to be in the right neighbourhood.
If Coronavirus taught us anything, it was the importance of living in the right type of property in the right neighbourhood.
In our new “Covid Normal” world, people will pay a premium for the ability to work, live and play within a 20-minute drive, bike ride or walk from home.
Residents of these neighbourhoods have now come to appreciate the ability to be out and about on the street socialising, supporting local businesses, being involved with local schools, enjoying local parks.
- We will not fall off the fiscal cliff in March
Some commentators are concerned that we will fall off the fiscal cliff when JobKeeper and the mortgage deferral system end in March.
I can’t see the government allowing this to happen after having put so much time effort and money into “building a bridge to get us across the other side” as Prime Minister Scott Morrison promised.
In fact APRA (the Australian Prudential Regulatory Authority) released data showing Households and small businesses are now paying back more than 80 per cent of the almost $250billion in loans deferred at the height of the coronavirus pandemic.
This is just another sign that the national economic recovery is on track and we won't fall off a fiscal cliff in March as some of those Doomsayers were predicting.
The reduction in our banks’ exposure to loans that may default puts them in a stronger position to continue lending and support of the economic recovery by lending to homeowners, investors and businesses.
Now, let’s talk about the number of the influences that will help influence our economy and our property markets in 2021
- The IMF now expects global GDP to grow5% in 2021, Huge fiscal spending worldwide plus unbelievably low interest rates plus vaccinations will stimulate economies
- Australia’s projected growth ranges from 4.5% to 5%, which is huge compared to our usual growth rates. In the past we were excited if Australia had 2-3% growth!
- Unemployment fell and jobs are being created
- Interest rates are low and likely to remain so for three years, even though some people are suggesting this may not occur if our property markets keep rising
- InflationThis year has started with a bit of an inflation scare and US and Australian headline CPI inflation measures look like rising to around 3.5-4% over the year to the June quarter as last year’s June quarter price slump drops out of annual calculations and higher commodity prices feed through.
Core and underlying inflation measures will remain the main focus of central banks and right now they are well below target in the US, Europe, Japan and China as is the RBA’s preferred measure of underlying inflation in Australia at 1.2% year on year.
Consumer and business confidence is rising
- China will be a problem, but the fact that we’re not travelling overseas means we are spending $69 billion locally instead
- Whether rising house prices cause because Apra or the RBA to interfere
Links and Resources:
Metropole’s Strategic Property Plan – to help both beginning and experienced investors
Shownotes plus more here: Here's why I'm excited about 2021 - What the next 12 months has in store with Pete Wargent
Some of our favourite quotes from the show:
“I’m optimistic about our future, but this year we’re going to require optimism balanced with realism because that’s what gives us resilience. – Michael Yardney
“We’re not going to have a cliff. We may not even have much of a step in March.” – Michael Yardney
“One of the things that happens after every downturn is a flight to quality.” – Michael Yardney
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