Happy new year: Our property experts give their 2021 forecasts

31 DEC 2020 By Maja Garaca Djurdjevic 14 min read Investor Strategy

As we bid farewell to 2020 – joyously waving goodbye with one hand and clinging to a champers in the other – our property investment experts share their predictions for the next 12 months.

2021

After a turbulent year of fires, floods, a global pandemic and widespread toilet paper shortages, we dare enter 2021 with optimism. Our property investment experts believe that there is a lot to be optimistic about as they share their expectations of the property market in the next 12 months. 

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Happy 2021!  

Simon Pressley, Propertyology head of research and REIA hall of fame inductee

A period of very high rates of home ownership and wealth creation is underway. History will reflect upon this as a once-in-a-generation era of capital growth plus Australia’s highest ever increase in rents.

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While Sydney and Melbourne will continue to be vulnerable markets, several alternative locations will produce more than a 20 percent increase in house prices in 2021 and possibly double in value within five years. Without a doubt, those earliest to the party will enjoy the best time.  

InvestorKit’s head of research Arjun Paliwal and Suburbtrends’ Kent Lardner

  1. Melbourne city unit markets will have price corrections. While developers have the ability to hold new stock over extended periods, the secondary market is where losses will start to accumulate. We expect to see thousands properties hit the market in 2021 from investors calling it quits.
  2. Investors will become more cautious, especially with regards to apartments. As losses mount for many apartment investors, their stories will become public. Investors who frequent the online forums are reading these posts and are very aware of real-life stories of unpaid rents and perceived poor attitudes towards landlords, especially from the Victorian government.
  3. Demand for family-sized apartments will remain steady as the rental crisis (houses) and extremely tight regional markets push prices up.
  4. Regional cities will continue to boom throughout 2021. All it takes is a modest increase in buyer demand from those exiting the cities into regions to have a significant impact. Many city buyers can easily outbid the locals and push prices well above the expected selling range. One interesting trend is the increase in car activity in the cities. 
  5. Granny flats in outer suburbs and regional cities will boom as a result of higher rental demand and limited supply in these markets.
  6. Traffic congestion in the cities will motivate a new wave of people looking for the sea or tree change and working from home.
  7. Pre-purchase research will start to focus on development applications and monitoring of current supply (inventory) and future supply. Many build-to-rent developments will be closely monitored by savvy investors who will need to appreciate the potential impact on rental properties within the same suburb.
  8. Fix and flip will be a big thing in NSW, but not everyone will profit. The changes to stamp duty in NSW will create a whole new industry. The winners will have done the right analysis of the market and the property before they commit to purchase. However, we expect to see a lot of losers who struggle with the analysis and overlook hidden costs.
  9. Depending on lending changes in March that roll out as lenders think of tweaks they can make using new responsible lending laws to streamline processes, we may see a second wind and further strengthening of lending confidence/activity. 

Victor Kumar, director Right Property Group

2021 will be an interesting year as we get to several milestones:

  1. Continued low interest rates
  2. Increasing rents in areas not reliant on hospitality, overseas students and tourism i.e. outside of the inner rings in most states
  3. Less supply
  4. Easing finance qualifications, with flagged APRA changes to come through potentially in March
  5. Lower than projected unemployment figures
  6. Federal and state government incentives around property, such as stamp duty relief and construction grants, along with amplified first home owner grants
  7. Increased savings and disposable incomes as Australians are unable to travel

All of these will lead to a largely buoyant market, especially in the middle and outer rings, with a strong sea and tree change still underway. There is likely to be double-digit growth in these areas, while the inner-city areas are likely to continue to struggle from a rental perspective.

Sydney and Melbourne are likely to lead the way, while Brisbane is expected to finally show some growth, especially in the investment-heavy areas. Perth will continue its strong growth surge, although it is likely the rentals will slip back to normal as borders open up again.

2021 is likely to be a year where you can acquire selectively and will hold you in good stead in years to come, but one must be cautious not to overcommit given the current low interest rate.

Sharon Fox-Slater, EBM RentCover managing director

The property market in 2021 will continue to evolve as the COVID-19 pandemic evolves. While there are still many unknowns, there are a few obvious forecasts for the year ahead. These include the digital transformation of the industry, and the need to better safeguard investments through adequate landlord insurance cover.

If we look back, COVID-19 saw a raft of changes in this space: a number of landlord insurance providers exited the market; the number of policies offered was limited; insurers amended their offering to exclude certain risks; and most stopped offering products that cover rent default. If we look forward, I think all of this highlighted insurance cover is an important part of an investment property strategy in 2021.

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