The housing market will take off in 2021 after a long year plagued by the pandemic-induced recession that saw Australians squirrel away $110 billion in savings, according to experts.
While the coronavirus hit Australian shores hard earlier this year, the health crisis and the economic devastation it brought with it have since steadily improved.
The lockdown saw the real estate sector shutdown like many other industries, impeding normal selling and buying and dragging down property prices.
But with the economy out of a recession and auction clearance rates steadily rising, Australians’ strong appetite for bricks and mortar has returned – and some of the $110 billion that households saved during the pandemic is likely to go into the housing market.
Commonwealth Bank Of Australia’s head of Australian economics Gareth Aird said improving consumer sentiment, low interest rates and cashed-up households were fuelling price growth.
“You’ve got a few forces that are all pointing to higher house prices,” he said. “Some of the forward-looking indicators like lending have increased quite quickly in the past four months,” Mr Aird said.
He said property markets around Australia showed no signs of slowing into next year.
“The price people are willing to pay for an asset is going up and property is no exception,” he said. “You’re either renting or you’re an owner-occupier and if the borrowing costs come down … then it’s a very natural response.”
New home loan commitments reached record highs in October, according to Australian Bureau of Statistics data, which showed the total value rose 0.7 per cent to $22.7 billion in October.
Mortgage Choice Dee Why principal James Algar said consumer sentiment had picked up with more and more people preparing to enter the market next year.
“Just in the past week, I’ve had two scenarios where the parents have turned around to the kids and said we’ll help you buy because you need to buy now,” Mr Algar said.
In another case, another set of parents had decided to commit an extra $50,000 to $100,000 to help their children get into the market, according to Mr Algar, rather than wait for them to save up the deposit on their own.
“That’s a real sign of not just first-home buyers and buyers being confident but also the older generation where the money is coming from,” Mr Algar said.
He said he has had interested buyers return; buyers whom he had spoken to at the outset of the year who have now saved more money and felt more confident.
Confidence in the Australian housing market has boomed since August with the Westpac Melbourne Institute consumer survey recording a strong surge in November, rising 23 per cent to 132 – a seven-year high for the index and comfortably above pre-COVID-19 pandemic levels.
Finder international insights manager Graham Cooke said the two biggest savings goals Australians were working towards were buying a home and going on holidays.
“They are the two things people are saving for the most in Australia,” Mr Cooke said. “With interest rates being so low, the bottom rung of the ladder has come down a little. It will give Australians the opportunity to buy their first home this summer.
“Boomers with savings who have paid their mortgages off may help their children.”
With most forecasts pointing to rising property prices, many will want to get their foot in the door before they miss out, Mr Cooke says.
“We’ll probably get a bump early next year … to get on to that [train], some people will not want to miss out.”