About 12 months ago, many of us who work in the property industry – whether as lawyers, agents, brokers, bankers etc. were overcome with the feeling of uncertainty and major concern as to what the future would look like. This was on the back of disruption caused by the banking royal commission, a federal election (with a lot of noise from the opposition with policies that may have adversely affected the property market), and in the case of NSW state election.
I can still remember in the months of March and April seeing minimal new instructions for transactions and many headlines predicting a bleak property landscape.
But something happened...
As 2020 unfolded, the property market in NSW in particular did not crash and clearance rates remained quite healthy. In recent months I have been astounded at how encouraging the clearance rates have been for the Sydney property market. For example, the clearance rates for Sydney over the past few weeks have been averaging in the high 70% percent range.
The driver...
So, what is driving this? There are some key drivers that are underpinning this strength in the market:
- Ridiculously low interest rates, which mean that money is cheap and those that have job security can spend more on their house.
- The work from home phenomenon means that people either are upgrading their homes to have more space in which to work as well as play or are upgrading to a larger home on the outer fringes of Sydney or beyond as they no longer need to commute to work.
- People are sinking a lot of their extra cash into their home – or property investing – they can't travel and periods of social distancing and restrictions have seen the home emerge as a place for people to spend their leisure time.
- The Home Builder Grant has meant in some cases people are more prepared to invest in a new property or one that they can renovate.
The way ahead...
Markets are always very difficult to predict and time will only tell as to whether this current bull market in real estate can continue. My hope is that any downturn in the economy as a result of the winding back of federal government assistance programs does not have such an adverse impact on incomes that then sees downward pressure on prices. Of late, there has also been comment on inflationary pressures starting to emerge in the coming years ahead because of the extent of government assistance that has been combined with low interest rates – if this emerges as an issue, then interest rates will inevitably rise which will impact on housing prices.
Either way, working in the property industry is never dull and boring!
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