FY20 Wrap-Up and FY21 Predictions on the Property Market
It’s no secret that new home sales fell precipitously in FY20, and all markets — including the Sydney property market — are being impacted by Covid-19. But that’s not all that influenced Sydney’s real estate, housing, and financial markets. Indeed, FY20 trends were a mixed bag of low cash rates, refinance bonuses, and property purchase plunges. But the question remains whether FY21 will continue these trends — or flout them.
A lot has happened over the past financial year — of course, the most notable of which has been the impact of COVID-19 in Australia.
Let’s take a look at some of the FY20 trends in property and mortgages .
- RBA slashed the cash rate to 0.25%: We have the lowest ever cash rate in history. This has been intended to provide a helping hand to stimulate the economy, by making property purchase more affordable. There were four rate cuts throughout FY20, leading many analysts to wonder how low the rates could potentially go.
- Refinancing activity spiked: COVID-19 caused a lot of job uncertainty and people needed to seek out ways to save money. Australians learned how they could potentially save thousands of dollars a year by refinancing their home loans, and take advantage of historically low interest rates. Through refinancing, homeowners were able to save quite a lot of money, putting more room into their budget during difficult economic times.
- Auction and Lending Changes: COVID is causing some financial damage. But it wasn’t as much as one might think. The Sydney market proved to be resilient, and though things slowed, they are likely to rebound quickly. Of course, COVID-19 isn’t entirely over, and the situation may change in Sydney like we are now seeing in Melbourne. There were also a number of auction & lending changes during COVID-19 – the good being that a potential fall in housing prices will see the pendulum swing back to borrowers, but the bad being that financial uncertainty has seen most banks tighten their lending policies.
- Work From Home Revolution: Employees started working from home more which has sparked a regional property boom. The WFH revolution is about more than just “working from home”; it’s about a change in the way work takes place. Many are looking at their homes not just as their homes, but as their offices, and a lot of companies are looking to downsize their physical presence. A number of employees are also opting to live in outer regions and the country with more flexible work arrangements now being offered.
- Fluctuating House Prices: House prices continued to fluctuate in Sydney by 0.5%. It makes sense with so many radical changes occurring in the country and on a global scale, but home prices, particularly in residential areas, are falling. But as the economy regains its strength, house prices will most likely start to increase again. Home buyers and sellers alike need advice from professionals to ensure that they capture the most value from their investments.
Overall, the government has been hard at work trying to make it easier for home buyers to afford homes. At the same time, the market has been a little unpredictable — while Sydney’s market has proven itself to be resilient, there are still many external forces that are having an impact.
It’s hard to say whether any analysts have a true handle on what is to come for FY21, but there are many qualified guesses out there.
Most experts and economists are speculating about stamp duty potentially being on its way out, as the country looks to recover and even weather the economic impact of Covid. About 69 percent of respondents to a survey by comparison site Finder believe that stamp duty will be removed within the next year and a half, and most believe it will happen in 2021. About 80% of economists believe that stamp duty should be abolished entirely or replaced with an ongoing land tax. Regardless, it appears there is a significant amount of support for reforms.
Aside from stamp duty, there are other questions:
- Will the working from home trend remain? For at least the foreseeable future, it’s likely that at least some businesses are going to remain remote or will be adopting a hybrid business model. Others are going to slowly transition to brick-and-mortar work once again in the next few months.
- Will cash rates stay low? It’s likely that rates are going to stay low for the remaining year until unemployment and inflation are reduced as the economy needs time to recover from the blows dealt by Covid.
- What about international travel? This will highly depend on how the rest of the world also deals with Covid. Australian to New Zealand travel is likely to start before other travel routes are allowed.
The world is changing. But despite there being many significant challenges in the road ahead, Australia has been able to weather the storm quite well. It’s likely that things are going to start to return to normalcy shortly.
Early in FY20, Australia’s real estate market was already encountering some challenges in terms of foreign investing and affordability. While the government had initiatives to counter this, COVID-19 threw a wrench in the works.
As we enter into FY21, we will likely continue to recover from the financial impact of the COVID-19 crisis, and we will see our real estate market continue to recoup.
If you’re looking to invest in property or refinance, however, there are few better times. The rates are still low right now; if you have cash to invest in the market, both the rates and property values may never be this low again. Those who are poised to take advantage of the current economic situation should consider investing now.
Shore Financial can help you with the right strategic advice so you can kick off your property goals for FY21. Get in touch with us today.