After one of the most challenging years in recent memory, one broker has predicted a strong housing market in 2021 on the back of low interest rates, a spate of government-sponsored benefits, and pent-up demand for homes.
In a recent blog, Otto Dargan, founder and managing director of Home Loan Experts, revealed what he expects Australia’s property market to look like this year, along with some likely contributors to the sector’s growth.
“This would be a great time for first home buyers to get onto the property ladder, with a range of government incentives,” Dargan said.
These state-based benefits include the HomeBuilder grant, which has been extended until end of March, and the First Home Owners Grant. First time home buyers can also take advantage of the First Home Loan Deposit Scheme, which opened an additional 10,000 places for eligible buyers for the 2020/21 financial year.
Dargan also said that the Reserve Bank of Australia’s (RBA) lowering of the cash rate to a record 0.1% and its announcement that the rate will remain at that level of the next three years will create more opportunities for buyers to enter the housing market.
“This means that mortgage interest rates would remain low,” he said. “Borrowing money to buy a home would be cheaper and low interest rates would also increase buyer confidence.”
And the signs are pointing to greater home-buyer optimism as the new year begins. A recent survey by financial comparison site Finder revealed that more than two-thirds Australians believe that the conditions are right to purchase a home – a level of confidence not seen since the onset of the pandemic.
Dargan also predicted a shift in housing preferences, which might have been influenced by the months people spent under lockdown to curb coronavirus transmission.
“People will be looking for homes with backyards, a space for home offices, and space where their children can learn. With low interest rates, home buyers would be willing to stretch their spend to secure these homes,” he wrote.
Dargan added that a housing market undersupply was imminent as demand for properties will be higher.
This shortage of stock was particularly evident last December, when SQM Research recorded a drop in property listings despite an unusually busy month propped up by an increase in demand as restrictions were eased.
Dragan also forecasted a strong investment property sector where seasoned investors “sell off poor performers and upgrade to better quality investment to add to their portfolio” and first-time investors to “jump in a reap the benefits of lower interest rates.”