The property market outlook for the coming years looks very promising, especially for those who are wanting to build their wealth through intelligent investing.
Taylors Strategic Partner - Dylan Salotti, Managing Director of Divitis Finance - shares this insight into why 2021 is a great time to invest in property.
In 2020 Australia experienced its first recession in 30 years and unemployment is still high (a reported circa 7% nationwide) but the property market outlook for the coming years looks very promising, especially for those who are wanting to build their wealth through intelligent investing.
1. Property Values In Many Markets Are On The Rise
Australia's leading bank economists once again got it horribly wrong in their property forecasts just after COVID-19 hit Australia. Some were predicting 30% drops in house prices throughout 2020 and instead property prices in many markets across the country have actually gone up! Corelogic's pricing index shows dwelling values in 2020 have actually increased by a combined 27% across Hobart, Brisbane, Darwin, Adelaide, and Canberra and this is set to rise further in 2021 and beyond.
Terry Ryder, Chief Property Researcher of Hotspotting went against the economists just after the pandemic hit, stating “History teaches us in Australia, during turbulent economic times people turn to residential real estate as a beacon of safety and solidarity”, and he was right. This is backed up by historical research which clearly shows that in the period following almost every major pandemic or economic downturn, a period of strong property growth follows. Moral of the story - be wary of trusting bankers and the mainstream media who want to shout fear from the rooftops.
2. Cheaper To Borrow Money
Lenders are offering historical low interest rates meaning it has never been cheaper to borrow money and easier on your cash flow to hold a property. In fact many investment properties on interest only loans in markets like Brisbane, Adelaide, and Canberra are now cash flow positive from day one. There are also talks of credit being made more accessible in 2021 with the easing of scrupulous bank lending policy which has held back many potential buyers from entering the market.
In saying that, with interest rates so low, it's a terrible time for deposit savers only earning around 2% interest on their money who don't yet own any property. Fortunately there are a number of really affordable, and viable, markets out there that will enable those people to get into the market sooner, if they can be open to a rent-vesting strategy.
3. Property Rentals Are On The Rise In Some Markets
Although areas like Sydney's East are still experiencing higher than average vacancy rates, other markets in Australia are now seeing incredibly low vacancy rates (less than 1%) leaving a shortage of rental properties and putting upward pressure on rental incomes for landlords. This is great if you are a property owner! If you own property already and haven't spoken to your property manager in a while, 2021 might be a good time to ask for a rental increase.
4. COVID Infections In Australia Are Extremely Low
Despite the latest outbreak on Sydney's Northern Beaches, Australia is still one of the world leader's in handling the pandemic evidenced by some of the lowest COVID infection rates relative to other major nations (the US is experiencing some 150,000 to 200,000 fresh cases every day). This is having a positive impact on consumer sentiment and with a vaccine looking to be here in 2021 this outlook could become even brighter.
5. Decreasing Supply Of New Housing
The supply of properties for sale in 2020 decreased significantly with many owners holding back. Although we will see an increase of listings in 2021, generally we are seeing a downturn in the commencements of brand new properties coming through the pipeline for the next 2-3 years. This is in part due to developers holding off or slowing down since the pandemic and the amount of time it takes to get approvals and build in Australia. Whenever there are less properties for people to buy, there is more competition for the ones available which naturally puts upward pressure on property values (assuming there is demand). But in short, our population is still growing and if we don't build enough new properties to keep pace then we will have a housing shortage which is where we could be positioned 2-3 years from now, so the fundamentals of supply vs demand make a strong case for investors.
6. Unprecedented Government Stimulus Packages
The government has invested historical stimulus package spending to support the Australian economy. To put this into perspective, the GFC stimulus was $2,600 per person (in today’s dollars), whereas the COVID stimulus is currently sitting close to $7,600 per person. This is almost 3 times higher than the GFC. State governments are also helping out home buyers with further grants on offer and stamp duty exemptions making it more attractive for first home buyers to get into the market.
Like To Learn More?
Contact Dylan Salotti on 0430 227 328 to discuss a customised wealth strategy for your future - including what to buy and where to buy next.