It has been a stellar year for Australia’s housing market despite the ongoing uncertainty created by the pandemic.
Fiscal stimulus, pent-up demand and record-low interest rates helped support household and business spending across the country as states were plunged into rolling lockdowns.
The leading light has been Australia’s housing market and its breakneck capital growth over 2021.
Prices have surged by 22.2 per cent nationally, the largest annual increase since 1989, to push the estimated value of residential real estate to $9.4 trillion.
Federal and state governments have also driven city-shaping with major public infrastructure activity now set to double over the next three years, peaking at $52 billion in 2023.
To find out more about the year that was, we turned to the residential property industry and discovered what their biggest takeaways and learnings were from a trying 2021.
“The past 12 months have been an incredible rollercoaster and demand in the south-east Queensland residential market, in particular the coastal lifestyle markets, has been overwhelming.
“The announcement of the Olympics for our river city will also undoubtedly maintain the momentum over the coming ‘golden decade’.
“The competition has accelerated the volume and quality of offerings now in the market, along with significant pressure on the construction industry.”
Head of Property Assets
“The growth in the value of the Australian residential property market over the past year surpassed most commentators’ expectations.
“The pandemic has been notable for driving a strong shift in consumer sentiment towards lower density living, and for causing a flight from capital cities to regional areas.
“However, easing border restrictions and the eventual return of overseas students, immigrants, and hospitality workers, as well as businesses and nightlife, are expected to reverse this trend and boost demand for city accommodation.”
Dare Property Group
“2021 has been a year of expansion for Dare Property Group.
“Coming out of lockdown our predictions have been reaffirmed and we have seen record prices across the commercial and residential sectors we operate in.
“After the sell-out launch of Kalypso in Tamarama, where I still hold the penthouse, and the increasing demand for our Zero Gipps commercial building in Melbourne, our focus has never been clearer as we gear up to launch three new projects in 2022.”
Joint Managing Director
“The industry certainly saw its challenges in 2021, but the sustained popularity of the regions—driven by lifestyle benefits and continued infrastructure investment and the desire to get into the market—has fuelled another year of solid growth throughout Melbourne and Queensland’s booming growth corridors.
“Some of this activity was certainly fuelled by the ‘fear of missing out’, particularly among first-home buyers.
“We expect this current trend of regional migration, particularly to Queensland, to continue well into 2022, as a combination of factors including affordability, lifestyle benefits, and greater ability to work-from-home continue to drive buyer demand.”
Head of Residential Research
“Over the past year we’ve seen exceptional advancement in the prestige residential market across Australia.
“As the evolution towards luxury apartment living continues, so has the delivery expectation of the affluent population to a truly exceptional global standard.
“Accordingly, watching the number of new and established super-prime apartment sales surge, was a defining moment in 2021.”
“The year started off with very different property market conditions—demand was starting to pick up and price growth was well and truly happening.
“The stand-out however has been how extreme conditions have been. Sydney’s median is now up over 50 per cent since the start of the pandemic, while Canberra has just hit a $1-million median. Hobart is now the fourth most expensive capital city in Australia.
“The biggest learning I think has been—don’t listen to the noisy commentary out there but stick to looking closely at a wide range of data sets, as well as speaking to people on the ground, to get a good understanding as to what is going on.”
“Materials have become tight pushing building costs up. The overall effect threatens to be inflationary, which isn’t what we want when a key issue facing the industry is affordability.
“The biggest setback in regional Victoria is the introduction of the Windfalls Gains Tax, which is already leading to developers walking away from purchases.
“This is due to the valuation used for the tax margin being based on council rates rather than the higher price by the developer—meaning the land could actually cost up to 50 per cent than what it is worth. This will exacerbate already critical land shortages.”
“The standout moment for me for 2021 is that we now have a team of almost 50 professionals supported by armies of consultants and contractors.
“The reality is that all elements of the development industry are exhausted and needs time to reset—we have all put our heads down and got on with the job in really tough and changing times and I applaud everyone for that stoic performance.
“At a more operational level, we have doubled the size of the team and increased our footprint in Victoria, Queensland and Western Australia with commitments to enter New South Wales, ACT and South Australia in the next six months.”
Traders in Purple
“The test has been the response to these conditions, with the pandemic perhaps best described as a ‘Black Swan’ event for the property industry and other industries, of course.
“A standout of 2021 was the effectiveness of increased liquidity in the economy in an already very low interest rate environment, meaning more open lending criteria for both residential and commercial property buyers and business investment giving the country an insight into the effectiveness of liquidity to regulate economic activity.
“This doesn’t come without long-term consequences and management of these will be a challenge for governments of the future.”
Fund Manager – Build-to-Rent
“This year saw the emerging build-to-rent sector in Australia really gain momentum with new projects, partnerships and platforms being announced each week.
“I am encouraged by how the broader industry and government is reacting to the new sector and, to single out a defining moment in 2021, the NSW and Victorian governments have made a great first move to ensure the sector receives fair tax treatment which has in-turn kick-started construction on a number of projects. It is drastically needed to ease the housing issues across the country.
“It now seems logical that the federal government would also come to the tax table.”
The National Property Research Company
“The year 2021 has been dominated by the non-bank sector in financing new projects with the weight of capital looking for a home, particularly high net worth investors through to offshore super funds, meaning competition for development sites making many potential projects borderline given the generally compressed margins.
“While the Olympics is the obvious answer for south-east Queensland and how it will generate infrastructure growth over the next decade, the short-term defining moments extend to many capital city local council areas having a shortage of greenfield land available for development which saw house prices escalate rapidly and thereby excluding the first home buyer segment.
“Consequently APRA has stepped into the residential mortgage space attempting to put the brakes on the rapid house price movement, much like it did in slowing the investment cycle of 2016-2018.”
“The slowdown in the build-to-sell market has cemented build-to-rent’s status in Australia—this has been one of the most significant turning points in the Australian property market in recent years.
“Tensions with China has had a massive impact, and there’s been pullback from large developers and individual investors alike—there is still a lot to play out here and the impact this has will be very important.
“Soaring construction costs off the back of the trade and importing restrictions remain one of the biggest threats to our industry into 2022.”
BIS Oxford Economics
“Given the ongoing challenge of the pandemic, from lockdowns, supply chain disruptions and inflation, the economy and the property sector within it have generally been resilient.
“Restrictions have knocked both residential construction and housing market activity at times, but in general the sector is in a stronger position now (in terms of activity levels and prices) than it was before the pandemic.
“Fiscal and monetary policy support have clearly played a major part in this. But for me, this year has also confirmed the fundamental importance to people of where and how they live their lives.”
“The 2021 year was a record-breaking one for the national greenfield market with land sale volumes 170 per cent higher than 2019 and 43 per cent higher than 2020.
“A major change has been the rise in the popularity of peri-urban and regional land markets.
“Markets such as the Hunter Region, Geelong surf coast, Ballarat, and the Sunshine Coast have all experienced significant lifts in underlying demand for land while smaller metropolitan markets such as Adelaide experienced a doubling of demand and Perth’s greenfield market registered a 127 per cent increase in activity.”
“Spyre backed its knowledge gained in the market over the past decade, and acted on it, securing six sites this year.
“We saw it as optimal timing, others saw it as achievable in a market not yet ready for this level of product.
“Spyre’s three master crafted products, which will be built on the Burleigh headland at 10 Goodwin Terrace, will definitely be one of our proudest, defining moments in our development career and especially in 2021 when the world is at the height of uncertainty.”
Capital and Acquisitions
“A stand out for me was the day the Victoria government decided to shut down the whole construction industry for two weeks. That was a defining moment in 2021.
“The impact and ripple effect of the construction shutdown on families, businesses and the property development sector was far greater than any loud message the government was wanting to send to a very small minority of disrupters.
“It’s a typical government approach of act first, think later and demonstrates their inability to think laterally and commercially through this pandemic in order to find some kind of balance in managing health, lives and the economy.”
“The announcement that Brisbane will host the Olympic and Paralympic Games in 2032 delivered an immediate boost in investment-attracting confidence that will continue to build throughout the next decade.
“We’ll look back on 2021 as a turning point for transformational growth for south-east Queensland.
“It is our collective responsibility to think bigger, to be courageous in our decision-making, and to plan further into the future to 2032 and beyond, with a global perspective.”
“Funding assumptions based on limited pre-sales relies on non-bank lenders. Fortunately our projects have been aligned with Pallas Capital which has allowed us to push ahead and deliver the quality that the market expects in a reasonable timeframe.”
“Consistent and transparent communication with buyers throughout uncertain times, such as government mandated construction shutdowns, is absolutely essential.
“Being on the front foot of communication and being available to answer queries maintains and provides the platform for a trusting and working relationship between the developer and buyer.”
Time & Place
“The pandemic has increased the tendency for people to live and work in isolation which can have a negative influence on our lives and we need to be able to return to our cities, attend sporting events, enjoy the arts and travel again.
“A takeaway for us was that as people adjusted to remotely working for a second year in a row, there was an expectation for a different type of amenity within a commercial space—something that better reflected the transition in the work/home balance.
“I think that 2021 gave us the opportunity to collectively reevaluate what we want from our lives and while I think that we did lose an element of joy from our lives, it has given us a great opportunity to rethink how we live post-pandemic.”
“The standout defining moment for the property sector in 2021 was the 2.8 per cent surge in national home prices in March reflecting a combination of record low mortgage rates, incentives and a rush out of inner-city units into suburban and regional houses.
“The key learnings are that low rates trump an economic downturn in driving home prices if incomes are protected and defaults are avoided; that an absence of immigrants and foreign buyers does not necessarily mean that property prices go down as long as there are offsets working the other way: and that technology is set to have a profound impact on where we work and live.
“The latter is profound—while the pandemic was the change agent, the work from home phenomenon, made possible by technology, provides a path toward more affordable decentralised regional living.”
Head of Research
“Over the course of 2021 we saw more buoyancy in consumer sentiment through lockdown periods, where consumer sentiment remained above 100 all through lockdowns between June and October.
“I think people became ‘used’ to these periods, saw that the housing market wasn’t really affected by them price wise, and became less cautious about making purchases.
“This year has seen some extraordinary figures with Australian residential real estate hitting a record high $9.4 trillion, sales volumes reaching the highest level since 2003 and rental values reaching the highest since 2008.”
“This year has provided us with a renewed sense of optimism for the future of inner city multi-residential living.
“In particular, being close to friends, family, community and amenities is as important as ever.
“The past 12 months have seen the demand for high-quality home-sized apartment living unwavering—it is now considered a highly desirable option for more people, many of whom are living and working with more flexibility.”
Head of Residential
“There hasn’t been a defining moment as such, but rather consistent performance across both our masterplanned communities and apartment projects.
“The industry continued to demonstrate great resilience through the ups and downs of 2021 and we finished the year in a strong place.
“It reinforced to us that great products always sell—that is what we have found, with strong pre-sales for a range of apartment projects we launched this year.
Senior Research Analyst
“Stalled population growth, due to international border closures, hasn’t hindered underlying demand. In fact, demand has been so strong it exceeded the rate of new listings coming to market, depleting overall total stock to a multi-year low.
“The year’s heightened level of activity is not just a result of pent-up demand from lockdown, it reflects changed property decisions compelling more households to make a move. It has been the year of change and nothing shows this more than consumer behaviour when searching for property.
“The pandemic has forced us all to use our homes differently as we spent more time than ever in them and perhaps forever made a mark on our purchasing decisions, property wish lists and architectural trends.”
“A stand-out moment for the residential sector over the past year was seeing the scale of the impact that various federal and state government policy measures introduced to stimulate the property sector had on the industry and more broadly, on the Australian economy.
“From a customer perspective, the past 12 months have continued to highlight that shifts in work life and home life balance are driving home buyers and renters to re-evaluate what’s important.
“We’re generally seeing customers in the residential market demanding more either in terms of the quality of their home design, or in respect to location for lifestyle which has aligned well with Jinding’s communities.”
“Experience, patience and passion matters.
“The days of developments sprouting up by unknown developers without a track record but still being able to secure pre-sales, construction funding and a builder are few and far between.
“Whereas, those with a strong track record who are visible and able to engage with their market, and have existing relationships in the industry with funders and professionals are still able to navigate forwards.”
“In January, we launched our townhouse project at South Crescent [Victoria] and it sold out in five days.
“This was a real defining moment for us where we realised that ultimately, pandemic or not, if you are designing high-quality homes they will always sell.
“From a sales perspective, we are noticing that potential buyers are more knowledgeable than ever and have a much better understanding of what they are looking for—this makes it easier for us to find the right Neometro home from them.”
“The pandemic was undoubtedly the dominating factor affecting the property industry and economy in general this year; particularly in markets most directly affected by prolonged lockdowns including Greater Sydney and Melbourne.
“Pre-Covid, foreign buyers made up at least 50 per cent of purchasers, while during the pandemic they were nowhere to be seen.
“The second half of 2021 saw strong buyer demand for completed new apartments given the shortage of existing housing stock on the market and by the fourth quarter we saw the return of investors in the off-the-plan market.”
Lang Walker AO
“The resilience of the property industry is testament to the attitudes within, as we forged ahead with our $30-billion project pipeline, to ensure 2021 remained a big year for us.
“While the pandemic restricted interstate and international travel we shifted gear and learnt new ways to keep delivering on our vision.
“The success is on the scoreboard, as we’ve sold over 500 lots in 10 months since launching Riverlea—South Australia’s largest masterplanned community, feeding the supply lines of Australia’s booming housing market.”
“The past 12 months have certainly been interesting, however, I believe the way in which Queensland responded to Covid-19 and the lifestyle that we represent overall as a clean, fresh and vibrant state really drove up the demand for our property sector.
“The pandemic brought what was probably undervalued real estate in line with our southern counterparts.
“I have also begun to see a marked increase in sustainable features within the construction space, particularly from the larger players as this becomes fashionable and necessary at the same time.”