State of the Market: Q1 2021
The first quarter of 2021 is already behind us and for real estate, it has been a quarter unlike anything we’ve seen for decades.
The headline numbers are striking. Auction clearance rates are consistently topping 80 per cent. As at the end of March, CoreLogic reported that its national home value index jumped by the fastest rate in more than 30 years.
Sydney led the way with values rising by 3.7 per cent for the month and NSW topped the country in a regional context, with values up 2.8 per cent.
Those are extreme numbers in the context of a single month. The market has now surpassed its previous peak and the appetite for property that weathered the COVID-19 storm has only increased this year.
Underneath the figures are the stories of what’s happening on the ground. It’s a buying frenzy and even as we enter the colder months, the end is not yet in sight.
The Reserve Bank has doubled down on its stance that rates will remain low for the short term at least. Cheap finance is available and the employment market has been resilient, which supports confidence particularly as the vaccine rolls out.
The banks are expected to quietly begin raising their fixed rates later this year, with variable rates likely to follow, but the base is so low at present that many buyers could manage a slight upward shift.
Many of those buyers will have acted – or will have tried to act – before this though. Fear of missing out is fuelling activity. It’s owner-occupiers mainly: first home buyers and upgraders are dominating transactions.
Some downsizers are taking advantage of the current spike in prices though the prospect of purchasing back into the same hot market, plus the burden of stamp duty, is discouraging others.
Some investors are selling up too, perhaps stung by the rental moratorium that has eroded rental income for many, as the current high prices offer a way out.
This of course impacts the rental market and vacancies across many regional centres are next to zero. Demand from Sydneysiders who have settled on a permanent working from home arrangement, for at least part of the week, has tipped key regional markets into a severe case of undersupply.
For many people who want to rent, there are simply no properties available. It’s the same for many would-be buyers.
It’s an area in need of reform. There’s a critical shortage of housing in NSW and it’s not a Sydney-centric issue. The increase in listings the market experienced through March did nothing to soften price rises or affect clearance rates.
The strength of demand is too intense and for vendors, the opportunity is now.