Buying a home in 2021? Read this first
Thinking about making a sea-change or tree-change? Wondering if it’s a good time to buy in the city? With house prices rising fast across most of the country, here’s what you need to know to get onto the property ladder.
It’s official, Australia is experiencing a widespread property boom not seen for more than a decade.
After COVID-19 put the brakes on the housing market early last year, things have well and truly turned around. CoreLogic’s national home value index rose 2.1 per cent higher in February 2021, the largest month-on-month increase since August 2003.
What’s unusual is how uniformly property prices are rising across all city and regional markets. CoreLogic’s research director Tim Lawless says that hasn’t happened since the end of the GFC, when government stimulus was in place.
What’s fuelling property prices?
For the most part, price rises are being driven by record low interest rates, improving economic conditions, government incentives and, especially, historically low levels of stock on the market.
There’s also evidence that some parts of the workforce have come out of the pandemic better off, with higher savings than they otherwise would have had. The household savings ratio skyrocketed to 22.1 per cent in the March quarter last year, remaining high throughout the year.
What about regional markets?
The idea of swapping city life for the country has gained traction throughout the COVID-19 pandemic. The rise of remote working, combined with lockdowns and social distancing requirements, has led some urban dwellers to question their costly and congested lifestyles.
So are more people really ‘escaping to the country’?
Well, yes and no. At first glance, the trend appears to be supported, with the combined regions experiencing a staggering 9.4 per cent rise in dwelling values over the past year, compared with 2.6 per cent for the combined capital cities.
On closer inspection, CoreLogic says the uptick in regional prices has been a trend since at least mid-2019, especially along the eastern seaboard, where the cost of housing in our biggest cities was already driving net migration losses. The trend is more pronounced in Victoria and New South Wales.
Demographers have also been at pains to point out that what’s really happening is less people are arriving in the major capital cities, due to international border restrictions. This makes it appear as though more people are leaving the cities than really are.
For example, ABS data shows that net migration to the capital cities dropped by 11,200 people in the July-Sept quarter last year (the biggest fall on record – ever). But that was mostly due to a 10.6 per cent drop in arrivals. The number of people leaving the capital cities for regional areas only increased by 1.2 per cent.
Thinking of making a sea or tree change?
Whatever the reason, there’s no question property prices in the regions are rising, and rising fast.
So if you’re among those thinking of leaving the big smoke behind, what should you consider?
University of Southern Queensland researcher Rachael Wallis says her research has found it’s all about values.
“Do you value the things that make a rural place what it is, whether that’s peacefulness, an absence of people, vistas of rolling hills…? If you do, there’s a good chance a move to the country will enable you to live more closely in line with your values and so be a successful one,” she says.
“If, on the other hand, you value… attractions, shops, events and being close to services, you might want to reassess whether a seachange or treechange is right for you.”
For many people, the idea of country life evokes romantic notions of space, clean air and a lower cost of living. Others are seeking a smaller, more tight-knit community feel.
But as Dr Wallis found during her research, those ideals aren’t always accurate. The regions generally have fewer job opportunities and less services. In some cases, the cost of living is relatively higher.
So consider what it is you really value about living outside of a major city. Make sure to do your research well and find out whether the place you’re moving to can actually deliver it. Look into the cost of housing, the cost of living and the availability of health, education and other services.
It’s often a good idea to live in the area for six-12 months before buying, to get a feel for whether it’s a good long-term fit.
And if you’re buying in the city?
With stock levels and interest rates both at historical lows, city housing markets remain tight. Many commentators expect the growth in property prices to continue this year and next.
CoreLogic’s Tim Lawless says, “Serious buyers would be well advised to have their financing pre-approved and be ready to act fast in order to secure a property under such tight supply conditions.”
Still, dwelling values in many capital cities remain below their most recent peaks, suggesting there is value to be found yet. That includes Sydney and Melbourne (both down around 3-4%), Perth (-19%) and Darwin (-15%).
COVID-19 has also reduced demand for units in the inner cities, driving down prices. This could offer opportunities for first time buyers and owner occupiers to return to these markets, while investors are forced to wait it out.
Just remember, there’s still a long way to go on the road to economic recovery, and no guarantees about what COVID-19 will bring. So stay within your means and don’t be tempted to put yourself under financial pressure to secure a property.
With the right research and timing, you could find yourself snapping up your very first, or perhaps next, home this year.
As always, please don’t hesitate to reach out to our team with any questions.