House prices have increased by 3.5% over the last six months
So, we’re in the middle of a pandemic and the property market is on fire. Median property prices have risen considerably in all the four capitals on the East coast of Australia over the past three months. Borrowing is at a record high and auctions draw more than twenty bidders at a time. What on earth is going on?
Well, there are a number of reasons why the housing market has heated up. They’re listed below:
- Interest rates are at record lows and they are likely to stay that way. The Reserve Bank Governor is on record as saying that interest rates are likely to remain at 0.1% until 2024.
- A lack of houses has fired demand. The number of homes on the market had dropped by 30% year on year in January.
- Competition in the mortgage market has pushed rates down further.
- The number of buyers has increased. This is driven by first time home buyers and people upgrading.
- The trend of working from home has allowed people who lived in expensive suburbs close to the CBD to move to the outskirts of town where they can buy bigger houses without increasing their mortgage.
- Stimulus packages have kept people employed. They have also helped homeowners to keep their homes as they have been able to defer their payments.
- Many people are leaving the cities to move to quieter areas which is why property prices in regional areas rose more they did in the cities in 2020.
- Many young people have been able to buy houses through Homebuilder, which has also helped to keep the construction industry, a major employer, going.
- The availability of superannuation has made paying a deposit easier. Single people can now access $20,000 and couples $40,000.
- First time home owners are buying like never before as they take advantage of low interest rates and government incentives.
- Australia has managed the virus much better than almost all other countries around the globe. This has built consumer confidence.
- People are spending on their homes the money that they previously spent on holidays.
- Vaccination approval has given people new hope that an end to the pandemic is in sight.
- In today’s market houses are selling faster than apartments.
House prices have increased by 3.5% over the last six months whilst there has been little movement in the price of apartments. Over the past 3 months houses have done better.
As people have had to spend more time at home, they have wanted to increase the space and comfort in their homes. Money they previously spent on leisure activities such as travel is now spent on upgrading living spaces.
People leaving crowded city centres for quieter areas prefer to buy houses. In some large cities the supply of apartments is higher than demand and construction of apartment blocks has not slowed down.
This is a great opportunity for first time home owners. They can now buy an apartment at a competitive price and then wait for the demand to improve.
The market is unlikely to slow at this stage unless Covid-19 raises its ugly head again, or if there is a significant increase in the supply of property. Meanwhile, 2021 looks like a good time to sell.
