Property transactions are forecast to increase by roughly a quarter in 2021 after a significant slump through the middle of 2020, data from RiskWise Property Research has highlighted.
COO of BuyersBuyers.com.au, Pete Wargent, said that 2020 has been one of the most unusual years on record for real estate markets in Australia.
“We came into the year with relatively low unemployment and confidence running at a solid clip, but as the first quarter of the calendar year progressed it became increasingly clear that significant disruption could be on the cards,” Mr Wargent said.
“We then had multiple buyers putting their searches on hold until the situation became clearer. But now it’s notable that they’re feeling confident enough to buy again.”
CEO of RiskWise Property Research, Doron Peleg, said that although transactions in the established market continued to flow through in modest volumes, through April and May off the plan sales were becoming increasingly scarce.
“The exact final numbers will only be known in the fullness of time, but it seems likely that with total stock listings stuck at low levels deep into 2020, stamp duty coffers will experience a substantial hole due to this year’s major disruptions,” Mr Peleg said.
Mortgage rates falling
Mortgage rates fell through 2020 to the extent that mortgage interest serviceability is now at the most comfortably share of household income since at least 2002, and below the equivalent share seen as far back as the late 1980s.
With the Reserve Bank of Australia cutting the cash rate target to 0.10 per cent and lenders able to access the Term Funding Facility, competition between lenders is increasing and mortgage rates have continued to decline into the fourth quarter of 2020.
Mr Peleg said that typical mortgage rates on new loans had fallen by close to full percentage point since mid-2019.
“Many lenders are now offering fixed mortgage rates from under 2 per cent for the first time, and responsible lending obligations also finally look set to be rolled back in 2021,” he detailed.
“We forecast a strong 25 per cent increase in transactions in 2021. As we have previously detailed it’s now cheaper to buy than to rent for many younger prospective market entrants, and investors will be back in the new year as an unusual opportunity to positively gear investments presents itself.”
Mr Peleg said RiskWise Property Research’s research suggests that there is a significant burst of pent-up demand set to be unleashed as Victoria’s economy has reopened and travel restrictions are eased.
Mr Wargent added that “the biggest unknown factor at this point is whether the international borders will be open and flights operational before the second quarter of calendar year 2021.”
“While acknowledging the potential for delays in vaccine progress, it seems likely that residential property transactions will increase by a quarter in 2021 as in addition to homebuyers we’re now seeing property investors also returning to the fold, lured by the prospect of neutral-to-positively geared investments.”