Five predictions for the property market in 2021

The year 2020 has been an uncertain time for the Australian property market. Despite predictions of large price falls early in the coronavirus recession, the property sector has come through the crisis in remarkably good shape.

Property prices increased across the country during the pandemic and while supply is still low in most capital cities, buyer demand on realestate.com.au is at an all-time high off the back of a plethora of incentives. With demand through the roof, it's certainly a good time to think about selling for those considering a change.

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1. Demand to purchase will remain at elevated levels

Despite being headlined by the recession, rising unemployment and business closures, interest in residential properties for sale has skyrocketed in 2020.

Household saving has reached levels not seen since the mid-1970s, with many Australians unable to spend money the way they normally would. Borrowing costs have never been lower and governments are pumping money into the economy in the form of HomeBuilder, first-home buyer incentives and stamp duty relief in some states. All of these factors are encouraging Australians to consider buying property.

2. Some rental markets will remain challenged

Renter-centric, inner-city unit markets have faced tough times during the pandemic, but this is certainly not the case across the board.

Inner-city apartment rental markets are extremely reliant on people migrating to a new city, whether that be overseas arrivals for study or work or people arriving from interstate. In 2020, the drivers of such migration have been broken due to the pandemic and inner-city apartments have seen significantly reduced demand and subsequent price falls.

3. First-home buyer activity to fade and investors to return

Demand from first-home buyers in 2020 has been buoyed by fewer investors, historic low borrowing costs and government incentives. As a result, the value of lending to first-home buyers reached an historic high in October 2020 and was 48.6% higher year-on-year.

4. Low overseas migration will have repercussions for new housing 

Low overseas migration due to border closures will continue to hamper the new housing sector

by Jessica A.

If someone wants to purchase a property before they become a citizen, they will typically have to purchase a new home. Given this, a lot of demand for new houses and units is driven by non-citizen purchasers. With the international borders shut throughout this year and seemingly well into 2021, this will create challenges for the new housing sector.

5. Property prices to continue to rise 

Australia's housing market has been surprisingly resilient through the recession in 2020. Property prices have been rising over recent months, fuelled by strong demand and low borrowing costs. It seems unlikely that these conditions will change in 2021, unless there is an unexpected surge in the volume of stock listed for sale.

While stock for sale is likely to rise, it still seems likely that it will not surge to the extent that it removes the upwards pressure on prices.

Overall, 2021 is shaping up to be a strong year for the housing market but certain areas will fare better than others.