Property industry confidence has made its highest jump on record as 2020 comes to an end.
Despite an extended lockdown in Victoria, more than 450,000 jobs have been added back to the economy across the past four months while a raft of federal and state stimulus measures has also seen home building pick up.
As Australia enters the start of a gradual recovery from the largest economic downturn since the 1930s, how do those across the property industry think we will fare?
“The most striking thing about this year has been the fact that the property markets have proven to be far more resilient than the experts predicted.
“Fortis has again found that the high-end markets that it targets have outperformed the wider markets.
“We believe that 2021 will see a strong rebound in economic activity generally in Australia.
“We also believe that CBD fringe commercial assets will continue to outperform next year as businesses re-weight their operations away from the CBD’s.”
Head of Build-to-Rent
“Despite all of the understandable negativity surrounding the potential impact of Covid-19 on the property markets across Australia, 2020 has arguably been a breakthrough year for build-to- rent.
“We see 2021 being the start of the Build to Rent sector beginning to mature and leaving its formative years behind.
“Schemes will be opening, more developments will enter the construction phase and the market will continue to be educated (at a developer, investor and resident level) of the benefits that BTR can bring to the Australian housing offer.”
“While we expect activity to return to pre-virus levels by the end of 2021, it will take years for unemployment to recover, even in this best-case scenario.
“Further, large uncertainties remain, even with a vaccine seemingly close to being rolled out.
“As such, federal and state fiscal support will be key for a sustained recovery, while monetary policy will assist, at the margins, by keeping the cost of credit low.
“We next expect house prices gains of around 5 per cent and 6 per cent in each of the next two years.”
Head of Residential
“Covid-19 has reinforced what’s important and embedded in our collective psyche an appreciation for products and services that offer substance over sizzle.
“In a development sense that will translate to buyers gravitating to projects that promise and deliver on quality and care in every detail, rather than being distracted by projects that might offer a ‘bit of bling’ but are found to be lacking when it comes to quality construction and design longevity.”
“Looking forward, there remains much discussion regarding the impact of house prices in the media and there is now an improved outlook on price movement from six months ago.
“With the scheduled end of JobKeeper and deferred mortgages programs still yet to be determined, along with other macro factors impacting consumer confidence, there is still uncertainty as to whether the momentum evidenced in the first half of FY21 will be maintained in the second half of the year.”
MD Market Economics
“While it may seem surprising to see prices go up during a recession, since around August a number of issues had combined to drive [house] prices up.
“There has been a big pickup in first-home buyers, where they’re perhaps dipping their toe in the water and starting to look a housing opportunities with interest rates so low.
“The fact that we have immigration basically at zero for two more years means that perhaps, once everybody gets this initial buying out of the way, that maybe we’ll be hit by the harsh reality of just no new demand coming through.
RiskWise Property Research
“The latest housing figures reflect improved market conditions, stimulatory settings, and the successful containment of Covid-19 in Australia.
“While some risk areas of the market remain, especially in some of the oversupplied unit segments of the market, overall, 2021 is set to be a strong year of capital growth in Australian property.”
“We are seeing fantastic investment from state governments, and now would be a great time for federal stimulus addressing societal issues like affordable housing, homelessness, R&D, innovation and climate change.
“It is a good time to tender but be wary of low pricing – a bargain is not a bargain if a contractor or subcontractor folds, and there will be many of them.
“Bankruptcy numbers are down, because of the legislation changes around solvency during Covid-19, but this will change.”
Herron Todd White
“Most are looking back over the past 12 months with a sense of shock and awe.
“For property markets, this year was a vivid illustration of a principal that’s foundational to valuation.
“The reason we assess market value as at a set date is that no one knows with 100 per cent certainty what the future holds.”
Director of Supply Chain
“Covid accelerated existing trends of switching to ecommerce, same-day deliveries and the need for optimally located facilities, but it also meant uncertainty to supply chain volumes.
“Port industrial action plus delays to imports meant we had the perfect storm heading into Christmas.
“The need for effective and efficient supply chains remains and there is capital sitting there ready to assist.
“Deferred decisions from 2020 are now back on the agenda and we are poised for cracking 2021.”
“2020 has been a unique year for every industry. Despite widespread uncertainty we have seen some areas of the property market, namely the luxury end and downsizer owner occupiers, less affected than we anticipated earlier in the year.
“In 2021, I expect we will see a growing appetite for the strategic acquisition of residential and commercial properties, the beginning of which we are starting to witness. Sterling Global are always open to new acquisitions that align with our corporate strategy and vision.”
"There is the potential for people to chase riskier assets. I think the stability of the Australian housing market given the overall savings base is a positive.
“It feels like there is a lot of demand, there is certainly a lot of application demand, it will be interesting to see if that flows into calendar 2021.”
Head of Residential Research
“Buyers will need to act quickly to capitalise on softer prime prices rounding out 2020, with all five cities expected to experience stronger price increases next year.
“Transactions at the top end of the prime market were resilient in 2020.
“After a period of confinement, it’s not surprising buyers are seeking more space, and this will be a priority for some time to come.”
Student Accommodation Director
“Accelerated by the emergence of Covid-19, new ways of living and working throughout Australia are emerging and growing in popularity, at a time when people are increasingly becoming isolated and craving connection.
“As such, a significant weight of capital is now looking to enter the Australian build-to-rent and co-living accommodation sector.”
Caydon Property Group
“Meeting the demand from market entrants, buoyed by government incentives and record low interest rates, many of Caydon’s close to 300 sales for the year came from first-home buyers.
“Despite the impacts of multiple lockdowns, our team has stayed engaged and given us confidence heading into 2021.”
The Real Estate Institute of Australia
“As we reach the final stages of 2020, it is clear that our industry and the property market generally has withheld the shocks that were previously forecast.
“The wild predictions of thirty percent of our tenants becoming unemployed has proved to be unfounded with our members reporting less than five percent of tenants being impacted in the larger capital cities, in particular Melbourne and Sydney, and less than one percent in regional locations.
“2021 will be one to watch with the tenant non eviction periods coming to an end early in the year coinciding with the finalisation of mortgage pauses and no doubt these things will be centre stage in the New Year.”
Nikko Asset Management
“When I look at the market at the moment, I feel like there is starting to be a discrepancy between just how much support the central banks are providing and just what the asset markets are telling us.
“I think that the house price outlook is probably 10 per cent to 15 per cent higher next year" as long as the economy is strong
“My calculations imply that households could take on about 15 per cent more debt and remain at a stable interest rate coverage ratio.”
“The Specialist Disability Accommodation (SDA) market has continued to grow in 2020 with new investors and housing providers entering the market.
“SDA has potential to provide both long-term stable returns to investors, while also meeting the housing needs of people with disability.”
“The recent market correction has slowed supply significantly.
“Falling interest rates, and tax breaks from the government first in NSW and most recently Victoria which we had been anticipating for some time, have created an environment that is now primed for rapid growth and investment [in build-to-rent].
“Australians of all ages and backgrounds are increasingly choosing to rent as a lifestyle choice—this trend was around well before Covid-19.
“It has laid an attractive foundation for multi-family sector growth if some of the more structural issues could be overcome—which has now taken place.”
“We think that the recovery from the pandemic will be stronger than most anticipate.
“With many overseas economies starting to vaccinate at the same time, borders should be reopened by mid-2021 – earlier than the RBA’s and the RBNZ’s assumption of end-2021.
“That means that the labour market will tighten rapidly, allowing central banks to end their bond purchases.
“The upshot is that both the Australian dollar and the New Zealand dollar should continue to strengthen.”
Head of Research
“The national home value index is still seven-tenths of a per cent below the level recorded in March, but if housing values continue to rise at the current pace we could see a recovery from the Covid downturn as early as January or February next year.
“This trend towards stronger conditions in detached housing markets is evident across most of the capital cities.
“Relative weakness in the unit market can be attributed to factors including low investment activity, higher supply levels in some regions, and weaker rental market conditions across key inner city unit precincts.”
Project Marketing Chief Executive
“We are heading into the new year in quite a robust position with strong sales numbers and good, consistent demand across most markets.
“We are cautiously optimistic that 2021 will be a positive year with the demand we are experiencing at the moment expected to continue into the new year.
“The big unknown is the impact of the end of the Home Builder program in March, which has been critical to supporting buyers, and the development and construction industries, with about 50 per cent of our sales being eligible for the grant.”
Nathan Dal Bon
National Housing Finance and Investment Corporation
“There have been many challenges during 2020, but there has also been a great degree of resilience in the property sector to date.
“Due to historically low interest rates and government stimulus, construction activity and housing prices have held up better than many anticipated.
“The Covid-19-induced shock to population growth is expected to trigger a fall in new demand for housing over the next five years, though this could largely abate if international borders reopen, migration resumes and constraints on housing supply emerge.”
Chief of Operations
“2020 has been one of the most unusual years on record for real estate markets in Australia.
“We came into the year with relatively low unemployment and confidence running at a solid clip, but as the first quarter of the calendar year progressed it became increasingly clear that significant disruption could be on the cards.
“We then had multiple buyers putting their searches on hold until the situation became clearer.
“But now it’s notable that they’re feeling confident enough to buy again.”
Head of Home Loans
“A resilient housing market that has weathered the economic pressures of Covid-19 together with lower interest rates will give home buyers and investors’ confidence.
“While there are still many challenges including unemployment, job insecurity and lower immigration, we’re seeing some positive signs: improved consumer confidence, stronger auction clearance rates, more transactions, and falling loan deferrals—generally considered proof of a healthier market.”
Real Capital Analytics
“Investors in Australia have poured more money into alternative property sectors than ever before during 2020, with the amount of capital spent on sectors such as student housing and data centres surpassing that of conventional office properties.
“Not all alternative sectors are gaining traction, however. Investment volumes for seniors housing, self storage, and childcare facilities have all dipped this year.
“Nonetheless, the magnitude of those declines pales in comparison to the broader commercial real estate market in Australia.”
“What we have seen throughout 2020 is that the property market is now being driven by lifestyle choices.
“Throughout 2020 we saw that working remotely is a reality that is likely to stay [and] DKO’s Brisbane studio in particular has seen enormous growth for this very reason.
“We expect that 2021 will be driven by inter-state migration and people no longer being tethered to their working location.”
State Director – Office Leasing
“The good news is the worst is behind us, office workers are returning, demand has returned albeit at below historical average, there is a buzz in the city again and office space is high on the agenda.
“We are seeing more and more deals reaching heads of agreements and many more leases being negotiated.
“We anticipate the first quarter of 2021 to continue to build on the November and December momentum.”
“Covid-19 has changed some of the fundamental drivers of state economic growth.
“We now expect to see the states that were previously lagging behind, like Queensland and Western Australia, to outperform relative to the largest states of NSW and Victoria which had been performing well since the end the mining boom.”
Sentinel Real Estate Corporation
“Build-to-rent is certainly still an emerging asset class in Australia, but it has grown in 2020 with a number of significant projects announced nationally, including those from Sentinel.
“Looking ahead to 2021, we see there being a strong rebound in rental housing.
“As the Covid-19 pandemic hopefully recedes even further in Australia, people will return to city centres in greater numbers, with a new view on living situations.
“The typical types of units that have been created in many major cities, with small floorplans and awkward layouts, will begin to look much more restrictive.
“As a result, residents will seek out better accommodation, which is the space we believe our build-to-rent properties fill.”
“I foresee many teams and individuals finding personal balances of being on-site and working from home, with many business professionals likely opting to keep working from home for 1-2 days a week, taking into account things like commute times, face-to-face requirements, and home environments.
“Office design needs to adapt to include a greater proportion of floor space allocated to meeting rooms, training spaces, collaboration areas, and breakout and social spaces—with the role of the office becoming more of a collaboration hub, the design needs to follow.
“Work that simply requires a desk and a chair will have been done elsewhere, but team collaboration, networking, and culture-building remains most effective face-to-face.”