Will investors return to housing?
While the housing market provide resilient last year, there are a number of factors at play that could see a pickup in other parts of the market that have lagged.
Speaking at RFi Group’s Australian Mortgage Innovation Summit 2021, CoreLogic head of Australian research Eliza Owen outlined the data supporting some major property market trends of the past 12 months and why the overall outlook for the next 12 months is positive, with some pockets of risk.
Following a year in which investor activity fell, but overall property prices rose, investors are likely to return to the property market in 2021, according to Eliza Owen, Head of Australian Research at CoreLogic.
“There has been a different trend between capital city values and the rest of Australia,” she said.
While capital city housing values grew by 1.7 per cent over the year to January 2021, regional Australia saw values rise by more than four times that much - at 7.9 per cent.
Regional Tasmania was the best performing – rising 12.1 per cent over the 12 months to January 2021, followed by regional South Australia at 10.6 per cent and regional NSW at 9.5 per cent.
Of the capital cities, Darwin was the strongest performer, with housing values there rising by 11.4 per cent, followed by Canberra at 8.5 per cent and Hobart at 6.8 per cent.
Owen put the increased interest in the regional property market down to a number of factors - the normalisation of remote work during Covid, the relative affordability of regional areas (particularly given the potential for incomes to have been impacted by Covid-19) and the reliance of some cities on international migration for housing demand.
One of the initial impacts on the property market of Covid was a decline in rents in major inner cities, such as Sydney and Melbourne, where migrants often settle. That impacted investor yields for investment properties in those areas.
These areas will likely remain a risk as long as there is uncertainty surrounding international migration.
In other markets, Owen has observed a rebound in investor financing in recent months, which was up approximately 8 per cent over the month of December.
“This data is showing us that investors do seem to be coming back into the market,” she said.
Outliers to the general capital city trend of declining rents and yields are Darwin and Perth, which have experienced “extraordinary growth”, according to Owen.
House rents in Darwin were up 12.4 per cent in the 12 months to January 2021, while unit rents are up 10 per cent. In Perth house rents are up 11.7 per annually cent compared to 8.7 per cent for units.
“The only cities where were seeing rental yields higher than the past year is in Perth and Darwin,” Owen said.
“We may see a rebound in investor activity in these markets over 2021.”
A major buoying factor for the property market in 2021 are record low interest rates, which the Reserve Bank has indicated may not rise before 2024.
Headwinds for this outlook are the removal of some of the government stimulus measures this year and potential affordability constraints, given the high cost of housing in major capital cities.
“But overall, I think particularly if you’re a seller, in the near term it’s a pretty good outlook for demand for housing,” Owen said.