Sydney Property Market Powering into 2021

Median House Value back above $1,000,000  

  • RBA MAINTAINS CASH RATE AT RECORD-LOW 0.1%
  • SURGE IN OWNER-OCCUPIER HOUSING LOANS FUELING DEMAND
  • STRONG WEEKLY SYDNEY CLEARANCE RATES IN NOVEMBER: 77%, 73%, 76% AND 79% 
  • SYDNEY MEDIAN DWELLING VALUE ACCELERATES +0.4% IN NOVEMBER TO $860,967
  • NATIONAL HOME VALUES FOLLOW SYDNEY’S LEAD, UP +0.8% IN NOVEMBER

 (CoreLogic and REIA figures. RBA Charts)

“It’s the most wonderful time…of the year.”  Festive cheer was definitely in the air as October’s upturn in property values accelerated through November. Things are setting up well for a strong first two weeks of December before the market takes a well-earned summer break into New Year.

Corelogic Sydney Home Value Index: Houses +0.9% month-on-month, Units Stabilizing

The dominant property value trends of 2020 continued in November, with houses up a strong 0.9% for a YTD return of 2.9%, a total return of 7.3% and median value back above the $1m benchmark at $1,000,170.

Units and high-density housing bore the brunt of the economic downturn but a recovery beckons there too. Despite a -0.7% drop in unit prices in November, the YTD return stabilized at -0.1% with a total return of +4.5% and a median value of $728,168.

The private dwelling downturn largely reflects an industry-wide slowdown in unit construction. Lower supply and higher demand from potential renewed immigration and overseas arrivals could see a strong 2021 upswing in Sydney unit prices.

Astute property buyers should be considering renewed purchases of discounted Sydney units. Units have long been the most economically sensitive sector of Australia’s market but this can work in the buyer’s favour as a leveraged wager on economic recovery from distressed asset price levels. 

Building approvals for detached houses have already swung to the upside. Once existing supply is cleared out, it’s just a matter of time before the same occurs for higher-density housing.

Economic Backdrop – The RBA Presses its Monetary Pedal to the Metal 

In his most recent December 1 Monetary Policy Statement, Reserve Bank Governor states that “economic data has been better than expected.” That’s great news for the property market. The RBA’s record-low 0.1% interest rates, continued government bond purchases and massive $200 billion Term Funding Facility represent an unprecedented level of central bank support for the Australian economy. 

Governor Lowe outlined how these measures will assist the economic recovery: by “lowering financing costs for borrowers…and supporting asset prices and balance sheets.” The RBA has never been more specific about ensuring strength and stability in Australia’s housing market. 

With this policy certainty in place, builders, developers, investors and owner-occupiers are all stepping back into the market. The recent surge in owner-occupier loan commitments was only matched in 2009 as Australia emerged from the GFC. Things are setting up nicely for double-digit total returns in 2021.

Digging into the data, housing interest rates for new loans have dipped below 3% for the first time. Outstanding loans and major banks’ reference rates continue to tick down. This increases serviceability of new and existing loans. With unemployment rates dropping, the glut of forced sales simply will not eventuate. This is evidenced by the continued strong clearance rates in all sectors throughout Sydney, regional NSW and Australia-wide.

The Bottom Line

2020 is almost in the rear-view mirror. Australia’s economy and housing market was put to the test in the most unexpected and difficult way imaginable, but passed this “stress test” with flying colours.

2021 should see continued improvement in market sentiment and housing demand. Record-low interest rates and easier terms of credit for borrowers have allowed the property market to recover from its mid-year swoon. New inventory should not impact the market until mid-year, while clearance rates remains high and employment improves. In summary, it’s a solid economic backdrop for continued strength in Sydney’s housing market throughout 2021.

V-Mark Design is wishing everyone a safe and happy holiday season. We will be closed from the 18th December to the 6th January. We look forward to working together in the New Year!