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With most of the property market finding its footing by the end of 2020, after the COVID-induced disruption, experts have grown optimistic about the future of real estate in a post-pandemic world.
REA Group’s chief economist, Nerida Conisbee, laid out the highlights of the performance of each capital city market in 2020, along with her forecast of what’s to come in 2021:
While Sydney bore the brunt of the impact of COVID-19 in early 2020, the capital city eventually found its footing, setting course for recovery by the third quarter of the year.
According to Ms Conisbee, price growth will continue into 2021, on the back of low interest rates and an improving economy. “There is nothing to suggest that pricing will divert from its fast trajectory,” the chief economist said.
The desire for more space will drive strong performance across the state, particularly for outer suburban areas and regional areas on the outskirts of Sydney, as well as the premium property market.
In contrast, rental markets and unit pricing could take more time to recover, Ms Conisbee forecasted, noting that rental markets require further boost in employment, the return of local students to university campuses and population growth.
Unit pricing, on the other hand, relies on the return of investor activity and better performance by rental markets.
Melbourne’s prolonged lockdown challenged the economy and, by extension, the property market. Still, a portion of the market saw green shoots of recovery throughout the year, Ms Conisbee noted.
House prices increased across Victoria, with the outlying suburban areas as the strongest performers.Peninsula, for instance, saw an increase of almost 10 per cent.
Moving forward, the capital city could continue facing the impact of COVID-19, including declining prices, slow growth in views per listing, increased rental listings and the slow comeback of investor activity.
“There are, however, positive signs,” according to Ms Conisbee. Among the factors that could assist Melbourne’s recovery are the jump in first home buyer activity and enquiry levels for new apartments, house and land development, as well as the strong auction activity.
The improvement in population movement, combined with stronger demand for second homes, led to strong conditions for South-East Queensland in 2020, with the Gold Coast and theCoast emerging as the top performers, Ms Conisbee said.
“Brisbane’s performance has been different in some ways to Melbourne and Sydney
during the pandemic.
“While outlying regional areas did well, the inner city of Brisbane saw the best house price growth in 2020… Even the rental market was stronger than Sydney and Melbourne,” the chief economist highlighted.
Moving on to 2021, Ms Conisbee expects Brisbane’s inner, east and west to be the strongest performers, with St Lucia in Brisbane’s west standing out with the highest house price increase, inner Brisbane’s New Farm with the highest unit price increase and the eastern suburbs with the strongest price growth overall.
Unlike the bigger capital cities, greater Adelaide did not see a single monthly fall in house prices during the recession, Ms Conisbee said. Even the rental market was particularly strong.
“Overall, Adelaide had a very good year, with the only weakness being units in the inner city, which experienced soft conditions, primarily because of a lack of local and foreign students,” according to the chief economist.
The outer suburbs and lower-cost suburbs saw the strongest price growth over 2020, while Adelaide’s West, Central and Hills saw significant rises in unit rents.
In 2021, it’s Adelaide’s southern suburbs that could steal the spotlight, Ms Conisbee forecasted.
“The area has already been a top performer in terms of both price and rental growth and continues to go from strength to strength, seeing one of the biggest jumps in popularity ranking in Australia as measured by views per listing on realestate.com.au.”
Following the trend of smaller capital cities outperforming the bigger capitals, Perth saw better conditions in 2020, with the pandemic accelerating the state’s economy and, in turn, the property market. Ms Conisbee attributed the growth to the revival of the mining sector, particularly iron ore.
House and unit price growth were exceptional in 2020, but it was the performance of the rental market that put Perth in stark contrast to Sydney and Melbourne.
“By the end of 2020, almost every suburb in Perth was seeing rental increases,” Ms Conisbee said.
The cheaper suburbs, such as those in Mandurah and Perth’s south west, saw the biggest price growth, driven primarily by strong first home buyer activity and big jumps in new home construction. Mandurah also saw the strongest rental increases.
Looking ahead, Ms Conisbee expects the strong conditions in Perth to continue, driven by demand in the mining industry, cheap finance, strong performance across the premium property market and growing confidence in the state’s real estate.
However, the frequent closure of borders, which leads to a lack of employees, could be “a handbrake to the economy, and by extension, the housing recovery”, the chief economist noted.
Hobart’s status as one of the strongest-performing markets in recent times has been virtually unaffected by the pandemic, Ms Conisbee said.
Throughout 2020, house and unit prices increased by over 7 per cent, with the affordable LGA of Derwent Valley standing out as the best performer. Similarly, rents rose across the city, by 2.2 per cent for houses and 1.3 per cent for units.
However, Ms Conisbee pointed out that despite the accelerating prices, “it appears the pandemic has slowed growth, which was most apparent in the rental market”.
With Hobart relying on tourism and education, which was significantly impacted by COVID-19, the relaxation of border controls will play a major role in price growth and rental growth in 2021, the chief economist said.
Canberra was a “boom town” in 2020, with price growth accelerating and rents increasing significantly. In fact, the capital city “possibly saw the best conditions ever recorded”, according to Ms Conisbee.
Highlighting its great performance was the state’s first $3 million suburb in Forrest Hill with a median price of $3.03 million, which was only the second suburb located outside of Sydney to reach this milestone.
The premium market took the spotlight in 2020, with the strongest price growth recorded in areas with a median over $900,000, such as Ainslie, which increased by 34 per cent over the year.
According to Ms Conisbee, the main driver of housing demand was the pandemic.
“Record levels of stimulus require a lot of people to administer packages. Government employment growth was strong, and so much so, Canberra was the only city to see a declining office vacancy rate over the year,” she highlighted.
With both first home buyers and investors active in the market, the chief economist expects growth to continue on to 2021, although the pace of growth is said to moderate as the economy slowly gets back to normal.
Similar to Perth, Darwin saw conditions turn around for the better in 2020.
According to Ms Conisbee, price growth was relatively evenly spread across all price points. Among the best performers were Nightcliff, Zuccoli and Parap, with price growth at 10 per cent, 8 per cent and 3 per cent, respectively.
The rental market also saw decent growth, with “a bit of a mismatch between strong rental conditions and price growth”.
In 2021, the chief economist said that it is likely for Darwin to sustain its current conditions, with gradual improvement driven by a growing economy and good conditions in the mining sector.