The property market has shown signs of improvement lately, enough that 2021 is predicted to be a strong year for housing prices. And while the Reserve Bank of Australia (RBA) has said that high unemployment rates will be the biggest threat to the market, this risk could be balanced out by lower interest rates.
If interest rates stay at historic lows, the RBA has said that we could see home prices increase by up to 30% in the next three years.
So what does this ultimately mean for homebuyers looking to invest this year?
According to CoreLogic, house prices have turned a corner. In the final quarter of 2020, they rose steadily for three straight months, culminating in a 3% boost for the year. This is further supported by the rise in mortgage price averages, having seen a 5% rise year-on-year.
There’s no denying the economic downturn from April to September. The pandemic caused a 2.1% drop in value overall. However, the latest numbers are a sign that the market is making a comeback. Tim Lawless, research director at CoreLogic, says, “The RBA’s cuts to the national cash rate had a major part to play in the dwelling value increase.”
Lawless says that the record low interest rates resulted in a spike in consumer confidence, especially after the COVID restrictions were lifted and the original dismal economic predictions never came to pass. It has been Australia’s commitment to containing the virus that has led to better, brighter futures for property owners and buyers alike.
The following index shows that the property market has seen a dip due to COVID-19. However, the impact on overall property values has been marginal, and it hasn’t taken long for things to turn around.
RBA has shared that first home buyer activity has seen a sharp increase due to low rates. For new buyers especially, it’s never been more important to focus on capital growth.
Choosing a location that will flourish is the soundest possible decision that you can make for your long-term finances. While renovations can certainly add value to a property, it’s too much of a gamble. In other words, you can’t count on fixing up a single property to turn a major profit.
If your property isn’t in the right neighborhood, it can make a big difference to your bottom line. In fact, 80% of your property’s performance will have to do with where it is. Some areas have outperformed others by as much as 100%!
There’s no possible way to know exactly which locations are the up-and-coming ones, but there are trends that can point to smarter purchases. Due to the current environment, it’s likely that we’ll see more interest in the inner- and middle-ring suburbs. This is where high-income owners and renters are ready to bid. Convenient and attractive, buying property in these areas puts you (or your renters) closer to amenities. It’s these kinds of perks that translate to outperforming capital growth.
Of course, new homebuyers will need to meet the new lending standards. With the rates of unemployment being so high, the RBA has tightened its lending standards for both residential and commercial property. APRA (Australian Prudential Regulation Authority) and ASIC (Australian Securities and Investments Commission) have both taken steps to ensure that lenders are especially careful with home loans for residential property.
With new work-from-home conditions in effect for most companies because of COVID-19, more people are also thinking of living in the country and working remotely. ABC reports that interstate property searches have increased. Spending months in quarantine in their tiny apartments have resulted in many Australians dreaming of wider spaces, which countryside living can offer.
There’s a lot to consider when you’re looking at Sydney house prices. While the prospect of 30% growth is no doubt appealing for people looking to buy in the short-term, it’s also by no means a guarantee. You’ll not only need to fund the initial purchase but also find a property in an area that will net you the best gains.
Buying a home doesn’t have to be stressful if you have a trusted partner like Shore Financial who can streamline the buying process. As veritable Sydney property experts, our team can help you find the right neighborhood so you can take advantage of your property’s capital growth over time.
With increasing house prices around Sydney, we can guide you throughout the buying process so you can make the most of your assets.
Give us a call today to learn more about how we go above and beyond for our customers (and how we can do the same for you).