If 2020 taught us one thing, it is this: the Australian property market is resilient.
When it comes to wealth creation and solid investment – bricks and mortar have always withstood the test of time. Case in point – last year, against a backdrop of a global pandemic and unprecedented financial uncertainty, properties held their value in all capital cities across Australia.
So, what does this mean for homeowners thinking about selling in 2021? We’ve collated our forecasts, insights and advice into one guide to help you understand if 2021 is the right year to sell your home.
First up, let’s take a look at the market
If you had asked anyone in March or April how they expected the property market to be impacted by COVID-19, you likely would have been met with an alarming response along the lines of, “house prices are inevitably going to fall off a cliff”.
Modelling conducted by the Commonwealth Bank of Australia in April showed that house prices could fall by up to 32% per cent. Similarly, National Australia Bank forecast under their most pessimistic scenario (a “severe downturn”), that house prices would plunge 20.9 per cent this year and a further 11.8 per cent in 2021. Other banks, economists and experts across the country echoed this sentiment as if it were gospel, unanimously forecasting that the buoyancy of the Australian property market was doomed.
Fast forward to December and the Australian property market is as buoyant as ever. According to data released by Core Logic in November, house prices in every capital city across Australia have, in fact, risen. CoreLogic recorded a 0.8% rise in dwelling values in all capital cities in November. It’s the first time in years we’ve witnessed house prices across both regional and metro Australia simultaneously rise.
If this growth trend persists, prices are forecast to rise by somewhere between five and nine per cent in 2021. Put simply, this steady price growth is great news if you’re looking to sell in the next twelve months.
What’s contributing to house price growth?
- Record low Interest rates
Perhaps the most significant factor that has curbed the forecast downturn in house prices is record low interest rates. Currently sitting at a historic low of 0.10 per cent, housing affordability – in terms of how much it costs to borrow money – is as cheap as it has ever been. It’s this affordability that is fuelling demand as more buyers are able to enter the market.
It is highly likely that the interest rate will not increase until unemployment is back to pre COVID-19 levels (around 4-5%). In other words, interest rates will likely remain at a historic low for at least a few years. Increased capacity for buyers to borrow almost certainly guarantees house prices will continue to grow in 2021.
- Supply and demand
With record low interest rates, more buyers are able to get a home loan and enter the market thus fuelling demand. At the same time, a likely result of the pandemic is a lack of stock on the market. The outcome of low supply coupled with increased demand? Upward pressure on house prices – excellent news if you’re thinking about selling in 2021.
- Incentivisation via grants and schemes
More buyers are set to enter the market in 2021 as a result of government incentivisation via various grants and schemes. Beyond low interest rates and tax cuts, buyers are being lured into the market via one scheme in particular – the First Home Loan Deposit Scheme. This Australian Government initiative supports eligible first home buyers to build or purchase a new home sooner as they are able to purchase or build a new home with a deposit of as little as 5 per cent, rather than the standard 20 per cent. Increased capacity to borrow means more buyers and continued upward pressure on house prices.
- Strong auction clearance rates
According to Core Logic data, in the week leading up to the 6th of December the combined capital city final auction clearance rate was 70.6%. This is the highest combined average since the week ending 5th of April. The steadily increasing auction clearance rate speaks to buyer confidence and increased demand in the property market.
- Increased household savings
One final factor likely to add pressure to already steadily rising house prices is increased household savings across the country. Many Australians, cautious in the midst of widespread employment uncertainty in the early wake of a recession, spent much of 2020 building their savings accounts. Data from the Australian Prudential Regulation Authority revealed households have tucked away almost $119 billion into their savings accounts over the past year, money that may well be funnelled into the property market come the new year.
Moving forward, positive sentiment around the COVID-19 vaccine stimulating the economy, increased consumer confidence and record low interest rates will underpin the already resilient housing market in Australia.
If this more recent positive outlook on the property market has inspired you to put your home on the market in 2021, here’s two things you can do before making your next move:
- Clear, declutter and start thinking about potential home improvements
Given that you will likely be having your home valued in the new year, the Christmas break provides a great opportunity to begin the process of clearing, decluttering and making improvements. Whether it’s sorting through your storage room, donating old clothes to charity or putting pre-loved items up for sale online – decluttering can take time, so you will thank yourself later knowing that you got on top of this task early on in the selling process. Additionally, a clean and tidy home maximises appeal and will help agents to easily understand the value of your home.
You can also use this time to complete any small repairs and make a list of tasks you might like to complete prior to opening your home to potential buyers such as repainting or replacing the carpet. If you have good DIY skills, you can make a start on small jobs such as sanding back the deck, fixing paint chips or using a high pressure hose to bring dirty tiles back to life. You can also make a list of areas that need improvement and require the help of a professional. Think about improvements that will entice buyers and in turn maximise your sale price. For example, an exterior makeover will make a great first impression while a fresh coat of paint inside will give your home an instant lift and modern feel.
- Start talking to real estate agents
Your real estate agent will act as the communication channel between buyers and yourself, therefore careful selection is extremely important to ensure you receive the best possible price for your property. Ultimately, you should select an agent based on their character, communication, and reputation.
Your real estate agent will be able to provide you with invaluable advice when it comes to selling, in particular when it comes to a pricing strategy. Moreover, they will advise on and coordinate marketing to ensure your home stands out, organise professional photography and take care of finding and engaging prospective buyers. Your agent will take the time to nurture these prospective buyers to get the best sale result for you.
Looking for an agent in your area? Search Stone Offices and get in touch today.