There’s never a shortage of property market predictions and forecasts- everyone has an opinion on which way the property market is headed. Commentary, especially in the last six months has been quite doom and gloom, we’ve heard predictions of everything from 10%-30% falls to complete market crashes.
However the Australian economy and our collective sense of economic wellbeing is heavily reliant on our property market and many have underestimated the lengths our government will go to preserve it.
We are seeing this in action with some significant policy changes recently that will have a direct impact on the market now and into next year. They are important for you to know and they lead me to believe that next year, 2021 will be a big year for the property market here in Sydney, if not the rest of Australia.
Here are five reasons, and a wildcard event that make me think next year will be a bumper year for property.
Reason #1 The Australian treasurer has announced that the responsible lending laws will be repealed from March 2021. This is big news. It is in complete contravention of the recommendations of the recent Banking Royal Commission and it will remove the onus on lenders to assess the ability of borrowers to pay their mortgage, instead leaving this responsibility with borrowers. It will essentially make access to credit- and more of it, easier. As we know, turning on the credit tap means more properties transacted, and for higher prices, as spending power is increased.
Reason #2 Freshly announced in the federal budget another 10,000 places have been confirmed for the First Home Buyers Deposit Scheme (FHLDS).
In plain english? If you’re a first home buyer the government will underwrite most of your deposit for a purchase up to $950,000. This will certainly increase first home buyer activity at a very accessible and popular price range.
Reason #3 Low interest rates. “Lower for longer’ is the order of the day, in fact theres reason to believe rates will be low for some years to come, and may even go lower. Low rates means low repayments, in fact the cost of home ownership can often be less than the cost of renting at current rates, which can give many would be buyers to enter the market.
Reason #4 Increased savings. No one took an overseas holiday this year, and the same goes for 2021 also. Now those tens of thousands of dollars saved need to be spent on something, and one of the only thing you can legally spend that kind of money on these days is a renovation or a property purchase. Did someone say investment property?
Reason #5 Immigration. Full disclosure here, this one is completely my opinion and it goes against current government policy and the ideas of my peers. However some facts that cant be denied. We have an ageing population of baby boomers whose retirement can only be funded by taxpaying dollars of 25-45yo migrants. Our universities are also heavily reliant on hefty foreign student fees. You heard it here first- we will resume our migrant and foreign student intake with gusto sometime in 2021 – and it will have a tailwind effect on our property market.
Reason #6 the Wildcard is abolition of stamp duty which has been discussed lately and if that happens a costly barrier to a lot of would be buyers will be removed. Consider that the stamp duty on a $1m property is around $40,000, this increases the buying power and the incentive for a very large number of would be buyers. Not only this, but upsizers, downsizers and investors will all have an additional reason to enter the foray. Again, nothing is set in stone in this respect, it’s all speculation. But there is talk, and if talk does eventuate into abolition expect a significant uplift to the property market in 2021.
So there’s six reasons I can see next year being a very bullish year for the Sydney property market, and despite the doom and gloom talk now, there are six very good reasons we will see prices go North.
As always if you have any questions or comments, or see things differently I’d LOVE to hear from you.