The Factors Sustaining Property Price Growth
Rising prices have dominated the property conversation over recent months as the market experiences strong demand in the face of a shortage of properties for sale due to the pandemic and lockdowns.
One of the big four banks, NAB, recently predicted that capital city prices will rise on average by 18.5% for the whole of 2021 – the fastest growth rates since the early 1980s.
While it has been a memorable period for owners seeking to sell, it’s been frustrating and challenging for those trying to move up the property ladder or break into the market.
Perhaps it’s an appropriate time to take stock of the market right now and better understand where values will head in the long term.
Two recent reports provide some context for the future of Australian property and its current position.
The respected American news agency, Bloomberg, recently reported on how Australia was not the only country with a booming property market. It said there were more than 20 markets around the world that had seen double-digit jumps in values.
Australia ranked only 15th as the fastest-growing market. The Kiwis led the rankings, followed by Canada, Sweden, Norway, Britain, Denmark and the US. A similar study by the Swiss investment bank UBS focused on global cities and ranked Sydney at only 16th.
Economists identified the same stimuli for each market – record-low interest rates, shallow housing stock, Covid-related fiscal incentives, lockdown-inspired savings and optimism of a post-Covid economic rebound.
So, what of our property future? A recent Treasury document called the “2021 Intergenerational Report” suggests Australia will continue to need a strong immigration policy to maintain economic growth – and that means a continuing demand for property.
Treasury estimates that by 2060 almost 40 million people will live in Australia– a spectacular jump from the 25 million currently residing here.
The takeaway is simple: we need a healthy property sector that attracts investment, and we can expect continuing pressure on our housing stock. A combination of these factors points to sustained and robust growth in property values in the longer term.