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What you need to know about the economic recovery – and how it will impact the property market

There’s been a lot of coverage this year about the positive signs pointing to Australia’s post-pandemic economic recovery and, in particular, what effect this is having on the property market. It’s mostly good news, with the word “boom” even being thrown around. If you haven’t caught up on the latest developments, here’s a rundown of what property hunters need to know.

SUNSHINE COAST HOUSE PRICES REACH RECORD HIGHS 

Australia’s regional housing markets remained relatively strong throughout 2020, with Sunshine Coast property prices reaching record highs.

The most recent Domain House Price Report reveals house prices rose by 10.2% last year to a median of $690,000 – the highest annual increase since 2008. Unit prices are up 7% to $449,500.

CoreLogic data shows that over the past 10 years, growth rates on the Coast have surpassed every other capital city (including Brisbane) and regional market across the state.

Prices are expected to keep rising in 2021 due to a combination of factors such as record-low interest rates, low stock availability and high buyer demand, improvements in consumer sentiment and Queensland’s lifestyle offering.

Buying an investment property now means you’ll avoid further price increases and enjoy better long-term capital growth. 

 

National best performers 2020

The Sunshine Coast had the biggest capital gain in one year of any suburb in the country. Source: CoreLogic Best of the Best 2020

HOUSING STOCK IS DWINDLING 

Vacancy rates for rental properties are at record lows right across the state. Official figures are now around 0.5% or lower, but it has hit zero in some areas of the Coast.

With supply levels low and demand high due to increased home buyer activity, prices will continue to climb. The median weekly asking rent for a Sunshine Coast home is a record $530 – a rise of 16.1% over the past five years, according to Domain.

The housing scarcity is due, in part, to the slowdown in construction and investment caused by COVID last year. Developers are now playing catch-up, releasing new land well ahead of schedule to try to keep up with demand.

Housing stock will increase as more investors re-enter the market. But with so little good land available, demand may outstrip supply – so get in soon. 

INTEREST RATES STAY LOW, HOME LOAN APPROVALS RISE

As expected, the Reserve Bank kept the official cash rate on hold at a record low of 0.1% and rates won’t be lifted until 2023-24, when inflation (currently 0.9%) is 2-3%.

Rock-bottom interest rates have led to a recent surge in borrowing. Australian Bureau of Statistics (ABS) data reveals the total value of new home loans increased for the seventh straight month in December, with lending approvals up a huge 31.2% on the previous year.

While the gains were led by owner-occupier loans, an increase in construction finance means investor activity is also picking up, according to NAB.

The knock-on effect of cheap credit, of course, is higher property prices as people borrow more.

Interest rates are so low that home loan debt will actually make property investors money – around 2% or more on rental return alone (based on a 4.5% yield). 

 

RBA Cash Rate

THE OUTLOOK IS POSITIVE 

Investors are feeling "considerably more positive", with the ME Quarterly Property Sentiment Report revealing sentiment in this group lifted by 15 percentage points last month. Regional Queensland recorded the highest positivity levels in the country at 58%.

Financial confidence is growing, thanks to expectations of rising residential property prices, higher levels of market activity, record-low interest rates and government incentives such as HomeBuilder.

The improvement in the job market is also encouraging, despite stimulus measures such as JobKeeper coming to an end in March. The ABS reported that unemployment has dropped to 6.6%, while job ads climbed for the eighth consecutive month in January. The majority of these new jobs were picked up in Queensland.

A reduction in mortgage repayment deferrals (to 2.4%, compared with 11% in May last year) and strong retail spending add to the positive outlook.

Favourable lending conditions and solid signs of economic recovery make investing in property a more attractive option.

 

Investor Sentiment
colour key

Investor sentiment lifted by 15 percentage points between December 2020 and January 2021. Source: ME Quarterly Property Sentiment Report (January 2021)

 

GROWTH DRIVERS REMAIN STRONG 

Population growth has been a key driver of performance in the local property market. The Sunshine Coast has seen some of the highest levels of interstate migration in the country over the past five years and this shows no sign of slowing.

COVID may have intensified this trend, but the Sunny Coast lifestyle has long been a drawcard. Its proximity to major centres also makes it popular, with residents able to enjoy the best of both worlds: regional living as well as the employment opportunities and amenities of the big cities.

The Coast has been in growth mode for a number of years and investment is pouring in. About $20 billion worth of infrastructure projects – from health care and roads to education and tourism – are helping to transform the region into a destination location.

As more people flock to the Sunshine Coast, property prices will likely continue to rise – along with long-term returns.

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Jason Dwyer

Jason is the Managing Director of Dwyer Property Investments and a trusted local expert. Together with build partner Dwyer Quality Homes, he’s been helping Queenslanders buy profitable, cash-positive, tax-effective investment property for 35 years. Visit dwyerpropertyinvestments.com.au.

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