Why is the Australian residential property market soaring in 2021?

A push towards lifestyle areas, buyer confidence and infrastructure development are key contributors to Australia’s residential property market boom.

In the wake of 2020, there were many doom and gloom headlines predicting an Australian property market collapse. In reality, the opposite has occurred. a time of unpredicted property booms in Australia, it’s critical that buyers and investors know how to make better decision in the market and understand how to take advantage of the trends occurring.

“Not only is [the market] not about to collapse, but it’s also actually showing growth nearly everywhere in the country … 2020 has been the best possible advertisement for residential real estate as an asset class because it was predicted to drop 15, 20, 30 percent, and it actually grew. And that’s remarkable,” Terry Ryder from the Ryder Report and hotspotting.com.au told KnowHow’s Bushy Martin on Real Estate Talk.

Josh Masters from Buyside Buyers Agents explained that one of the major movements unfolding is ‘decentralisation’, where more and more people are venturing out from the inner city suburbs to ‘lifestyle areas’ with greater freedom, particularly on the eastern coast in Queensland.

“We’re seeing actually a real push towards lifestyle areas that include coastal areas, regional suburbs, even the outer suburbs where you can get a little bit more space …people are looking for a place that they can relax, a place that they can spend a little bit more time. They don’t want to be sort of boxed in into these little workplaces,” Josh said.

“So they’re thinking, ‘ok well if I don’t have to come in to work anymore as much as I used to, where can I take my family now that’s going to be a better living quality of life for everybody involved, but I can still continue to do work?’

“So we’re seeing a lot of demand coming for areas where, for example, you can live on the coast in a smaller town, a lot more affordable than Sydney, where you can still sort of do almost a fly-in fly-out arrangement. So I think we’re seeing places like Forster, Port Macquarie, up towards Ballina and even the Gold Coast and Brisbane are getting a bit of a look now because they tend to get a little bit more sun up there and they’re a little bit more of a relaxed environment, but very close to Sydney in terms of being able to get to and from the airports.”

But why are prices soaring so high? Josh said it all comes down to confidence and optimism in the market, despite the negative market predictions last year.

“I think people are really gaining confidence. The low levels of supply that happened this year, where people were thinking, ‘I’m not sure I’m going to get the price I want, I can’t even get people through my home’, buyers are now crowding into the marketplace, getting their finances in place, and we’re just seeing a storm of buyers coming through,” he said.

“We’re also seeing an increase in first home buyers. They’ve got a massive amount of grants coming through and they’ve extended that deposit where they allow 10,000 people to come in. So that bottom end of the market is really being bolstered.

“I work on the ground with buyers as a buyer’s agent, and I’m just seeing a load more people coming in and really lining up, ready to go for 2021 to pull the trigger.”

Bushy and Josh also expanded on the potential stamp duty changes set to roll in, which will further encourage buyers and investors to purchase.

“I think [these trends] are going to be further accelerated by the ongoing changes, particularly in New South Wales and Victoria, around stamp duty, because stamp duty is one of the big hurdles to people getting the market. They can get the buying capacity, the money is cheap, but getting the deposit is always been the challenge. And stamp duty, depending on where you are, adds anywhere up to four to five per cent of the top of the purchase value,” Bushy said.

Josh added: “It hasn’t been decided yet, but that effectively allows people to put more money out of their pockets into the deposit, provided they can handle the finance, and that will effectively boost the market.

“The government’s not silly. They’re looking to drive as much wealth into property as possible because when people have growing property prices, there’s this wealth effect that takes place psychologically where they feel they have more money. They go out into the marketplace, they spend it, and it stimulates the economy.”

Finally, Terry Ryder also revealed the ‘big game changer’ of what he calls the ‘infrastructure led economic recovery’.

“It is clear that federal and state governments intend to bring us out of recession and to regenerate economies and create jobs by fast tracking, wherever possible, major infrastructure,” he said.

“And we’re already seeing that being rolled out. It’s going to be a huge factor for real estate markets in 2021 in all sorts of ways. Nothing pumps up residential real estate like new infrastructure does. It creates economic activity, creates jobs that creates demand for real estate, but it also improves the amenity of places and locations, getting a new rail link or an upgraded motorway or a new hospital that’s going to increase the desirability of those locations.

“So I think building on everything that’s happened this year, I think the infrastructure boom that’s coming, which is going to precipitate a resources boom as a consequence, I think that’s going to guarantee a national property boom in 2021.”

Listen to the full interview here.

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