How Australian house prices are set to rise again despite COVID – as one powerful banker predicts why
- Reserve Bank of Australia is expecting investors to drive up house prices again
- Governor Philip Lowe said record-low interest rates would entice investors back
- Australia’s border closure has affected Sydney and Melbourne real estate values
- Coastal regional prices hit record highs as more people could work from home
- SQM Research’s Louis Christopher said COVID was catalyst for lifestyle change
The Reserve Bank of Australia is expecting house prices to rise despite the weakest population growth since World War I.
Smaller capitals and provincial cities by the coast also did well as 21 regions across Australia hit new record highs, CoreLogic data showed.
Reserve Bank governor Philip Lowe said record-low interest rates of just 0.1 per cent would spark a housing market recovery.
The Reserve Bank of Australia is expecting house prices to rise despite the weakest population growth since World War I. House prices in 21 regions of Australia last month hit record highs, including in the Richmond-Tweed region of northern New South Wales (Bangalow house pictured)
‘To date, the demand from investors in residential property has been subdued, but it is possible that low interest rates will change this,’ Dr Lowe told the Committee for Economic Development of Australia annual dinner on Monday night.
The areas where house prices are at a record
Mid-North Coast of NSW
Coffs Harbour, Grafton, northern NSW
Richmond-Tweed, NSW far north coast
New England, northern NSW
Central West of NSW
Murray region of southern NSW
Launceston and north-east Tasmania
Moreton Bay, southern Queensland
Brisbane east and north
Adelaide central, west, north and Adelaide Hills
Capital region of southern NSW
Sources: CommSec, CoreLogic
‘This is one of the many areas that we will be watching carefully in the period ahead.’
The ability for more professionals to work from home has also seen house prices rise in regional areas by the coast as Sydney and Melbourne prices fell for much of 2020.
‘In some states, the markets in our regional towns and cities have been stronger than those in the capital cities,’ Dr Lowe said.
‘For example, while prices have fallen in Sydney they have increased in regional New South Wales.
‘Many regional centres have been less affected by the virus and some are experiencing increased demand as people work remotely and look for property outside the big cities.’
With three of Australia’s big four banks now offering fixed interest rates of less than two per cent, first-home buyers and owner-occupiers have in 2020 been keener on buying property than investors.
Landlords in inner-city areas, in particular, have also struggled as the virtual end of international student arrivals caused rental vacancy rates to hit double-digit figures.
In Melbourne’s city centre, 10.6 per cent of properties were empty in October, SQM Research data showed.
SQM Research managing director Louis Christopher said rental vacancies remained higher in big cities but were close to zero in many regional areas.
‘I believe many have used coronavirus as a catalyst for a longer-term lifestyle change,’ he said.
The closure of Australia’s border in March to non-citizens and non-residents is expected to cause population growth to shrink to just 0.2 per cent in 2020-21, the weakest increase since wartime 1916.
The ability for more professionals to work from home has also seen property prices rise in regional areas by the coast as Sydney and Melbourne prices fell for much of 2020. Pictured is the view from a Noosa balcony, as Sunshine Coast values reached a record high in October
Before the pandemic, Australia’s population growth pace of 1.5 per cent was the fastest in the developed world.
Dr Lowe said high population growth, before the border closures, had made housing unaffordable in major capital cities, with Sydney’s median house price a shade under $1million.
‘The effects of fast population growth have also been felt in our housing market and in pressure on some of our infrastructure,’ he said.
‘So the effects have been widespread.’
Reserve Bank governor Philip Lowe said record-low interest rates of just 0.1 per cent would spark a housing market recovery as investors returned to property
Without the usual annual net immigration pace of 200,000 new arrivals, the Reserve Bank is expecting annual wages growth of less than two per cent for the next two years – continuing a long streak of below-average pay increases dating back to 2013.
Inflation, now at 0.7 per cent, was expected rise to just one per cent in 2021, a level well below the RBA’s two to three per cent target band.
Announcing the latest rate cut on Melbourne Cup day, Dr Lowe said interest rates were likely to stay at record-low levels for three years.