Capital city dwelling prices to rise between 5% to 9% in 2021: SQM's Louis Christopher

Capital city dwelling prices to rise between 5% to 9% in 2021: SQM's Louis Christopher
Joel RobinsonDecember 7, 2020

Capital city dwelling prices will see strong gains in 2021, with Perth leading the way from Sydney, SQM Research boss and economist Louis Christopher forecasts.

Christopher's Housing Boom and Bust Report 2021 has put forward four scenarios, which will determine how the housing markets across the country perform next year.

The base forecast, or scenario one, would see the capital city average dwelling price rise between five to nine per cent, with Perth forecast to lead the capitals with growth between eight and 12 per cent on the back of an ongoing recovery in the base commodities market, further encouraging mining-based project investment.

Sydney would closely follow with seven per cent to 11 per cent gains, namely driven by the proposed NSW Stamp Duty/Land Tax opt-in for home buyers. Adelaide will closely follow Sydney with six per cent to 10 per cent.

Melbourne is set for the most modest rises, up anywhere between two per cent and six per cent, due in part to the extended lockdowns in 2020.

The ongoing international border closures combined now with evidence of current interstate migration outflows will also put Melbourne at a disadvantage

The dwelling price gains in the base case are forecast on the premise that the cash rates remains unchanged at 0.1 per cent, a widely expected scenario, QE expands, and a third COVID-19 wave would be contained by more lockdowns.

It also assumes ongoing support from the Federal Government, with JobKeeper extended to September quarter 2020, and a progressive roll out of a COVID vaccine. 

The report notes that the extension of JobKeeper is regarded as essential for the ongoing momentum of the housing recovery, which appears to have formed from the end of the September Quarter 2020.

If JobKeeper is scaled back too prematurely, the housing market recovery in Sydney and Melbourne could stall, SQM suggest.

Louis Christopher said the national housing market has responded to the unprecedented economic stimulus packages as well as record low lending rates.

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Capital city dwelling prices to rise between 5% to 9% in 2021: SQM's Louis Christopher

"Auction clearance rates have lifted since mid-year and various dwelling price measurements have started to record price rises," Christopher noted, adding that it is likely that the housing market will gain further momentum on the back of increased investor activity, especially from those who seek some sort of income yield.  

He does however suggest they have some misgivings on the longer-term consequences of these new stimulatory policies.

"If housing is regarded as an asset class that is not allowed to fall, Australia could have some rather serious social issues surrounding home ownership rates over the long term. In the meantime, risks have risen that this new recovery will be one of the more speculative rises seen in some time.

"Let’s keep in mind unemployment remains elevated and net migration is expected to be negative next year. We have a surplus of inner-city units in our two largest cities. And if there was another negative macro event in 2021, there is not much room left to cut lending rates further.

“Many in the community are starting to think they cannot ever lose on housing. That the Government will always be there to step into the housing market, if need be. And that is a scary idea...” 

Joel Robinson

Joel Robinson is a property journalist based in Sydney. Joel has been writing about the residential real estate market for the last five years, specializing in market trends and the economics and finance behind buying and selling real estate.

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