If there is one lesson every pundit should have learned, it is the danger of predicting the future for Australia’s runaway property market.
There has never been a shortage of people ready to predict doom for Australian property and in 2020, all of the factors had combined to finally bring those long unfulfilled predictions of looming price falls, flooded markets and mortgagee sales.
The COVID-19 pandemic did what years of rising prices could not – causing a spike in unemployment, a rise in empty rental homes in the main markets of Sydney and Melbourne, and producing no shortage of predictions that the property market was heading for a cut of 20% or even more.
Even more ominously, people and businesses who already owned properties were forced into taking loan repayment holidays and incomes were savaged by a series of lockdowns to fight the virus.
Rise replaces gloomy expectations
Instead, against all expectations, 2020 saw an incredible rise in the $7.3 trillion market.
According to CoreLogic figures, property prices across the country rose by 2% in capital cities and 7% in regional areas.
Instead of savaging the market, the lockdowns caused a rush on rural and seaside property near major cities after people who had been forced to spend much more time at home looked for better surroundings.
Frozen mortgages are now largely being repaid once again, while various government stimulus payments appear to have been successful at keeping incomes strong and pent up savings are ready to be used to bolster household spending.
This is amid record low interest rates, which have increased the spending power to buy property.
From potential disaster come seeds of a fresh boom
Out of the teeth of a potential property disaster in 2020, the seeds of a 2021 property boom seem certain to take root – although if there is anything the past year has shown us it is the foolishness of becoming too attached to any prediction.
Certainly, indications are strong, with first-time buyers taking out mortgages at their highest levels in more than a decade.
The Federal Government HomeBuilder package has driven a surge in housing commencements, with more than 75,000 applications for the $25,000 grant after a year end spike in 2020.
Some pundits such as Westpac have now forecast rises of 15% over the next two years, while UBS is expecting rises of up to 10% and maybe higher if the loosening of responsible lending rules pushes up loan volumes.
Predictions turn bullish as super may come into play
There are other forces at work as well, with the proposal to allow superannuation to be used for buying a first home still waiting in the wings with every possibility of becoming law at some stage and adding yet another stimulus to an already booming property market.
Then there is the open question of whether housing investors will return to the market this year and also what impact the abrupt pause to immigration will have on the market.
As usual, there are lots of perils in predicting the future, which as the pandemic has taught us can sometimes lead to unexpected results springing from even the most positive and negative of inputs.