Why is the Gold Coast property market so hot?
Original article by the legendary John McGrath, sourced at end.
Record levels of borrowing, three consecutive months of median price rises in every capital city, very high clearance rates up to 90% and 20-plus registered bidders at auctions. Not what you’d expect during a once-in-a-century pandemic but that’s what’s happening today.
Here’s why housing is so hot:
Record low interest rates, with the official cash rate likely to remain at 0.1% until at least 2024, according to the Reserve Bank Governor
Strong competition between the banks has pushed home loan rates down further
A significant lack of homes for sale (30% down year-on-year nationally in January) means more competition per property
More buyers are in the marketplace, predominantly upgraders and first home buyers
Many upgraders would not be in the market without COVID-19. The pandemic has inspired them to seek more space and/or move further away from the CBDs
A surge in people (mainly remote workers) leaving our big cities for lifestyle areas, with regional centres experiencing better price growth than the capitals in 2020
Billions of dollars in stimulus have kept people employed via JobKeeper and helped struggling home owners stay in their homes by taking up mortgage deferrals
The early access to superannuation was a game-changer for deposit savers, giving them access to $20,000 for singles or $40,000 for couples pooling their resources
HomeBuilder has enabled many young couples to buy their first home and given stability to the construction sector, which is a big employer in Australia
Millions of dollars that would usually be spent on travel is being pumped into property as people upgrade their homes in lieu of holidays
First home buyer demand is at a record high, driven by low interest rates and generous government incentives, such as slashed stamp duties
Australia is a global leader in managing the virus, which has led to higher consumer confidence
Vaccination programs worldwide are underway, with Australia to commence first doses by the end of February
Houses are outperforming apartments in today’s market, with the gap becoming increasingly evident in CoreLogic’s latest data.
While house prices across Australia grew by 3.5% over the past six months, apartment prices were stagnant. Over the past three months, houses have done better than apartments in every capital city.
This is a pandemic-induced trend. The virus and lockdowns have made people want more space around them. They also want more comfort at home, so they’re spending what would ordinarily be their travel and holiday budgets on renovations or an upgrade.
Many who can now work from home are moving to more affordable areas further away from the CBDs. Seachangers and treechangers leaving cities for regional areas are also targeting houses. This is the case for both buyers and renters.
This has led to a fall in rents for apartments, which has dissuaded new investors from buying. Investors tend to buy apartments, so their absence is impacting this market more.
Meantime, new high rises continue to be built and supply is overtaking demand in some areas of our large cities.
This presents great opportunity for first home buyers, who typically start their journey with a one or two bedroom apartment. If apartment prices soften further in 2021, young people in secure jobs can buy incredibly well now and wait for the next uplift in values, which will probably be after the international border opens.
Go into today’s marketplace with confidence. Owners of good quality homes can expect strong prices. Buyers can borrow more and enjoy a better home, potentially with some immediate capital growth if the market remains this strong all year.
The only things that will cool this market down are a third wave of the virus or a significant uptick in stock for sale. So, if you’re thinking of selling, the first half of 2021 is looking like a great window of opportunity to me.
The views expressed in this article are an opinion only and readers should rely on their independent advice in relation to such matters.
This article originally appeared in The Real Estate Conversation (February 15, 2021)
