By Guest Blogger, Leanne Pilkington, Managing Director,
Laing & Simmons and President REINSW
Unlike most other markets, and against all odds, the property market rebounded in the second half of 2020. Laing+Simmons Managing Director and REINSW President Leanne Pilkington says the rebound is sustainable, despite the challenges and unknowns ahead.
Low interest rates will be with us for years. We know from experience that this fuels higher prices. Coupled with the prevailing stock shortage and strong demand, property owners have reason for continued confidence, suggesting the current market rebound is sustainable and something to build upon as we enter a long, and probably bumpy, economic recovery period.
There are two key reasons the first half of 2021 will be interesting from a real estate perspective, and they both potentially fuel uncertainty: the expiration of JobKeeper in March, and the end of the deferred repayments window provided by banks.
The first, the end of JobKeeper, could have an impact on those mortgage holders who would otherwise have been in trouble jobwise as a result of the pandemic. For some, the measure has delayed the inevitable, although the employment market on the whole has demonstrated its resilience.
The second, the impact of the end of deferred repayments, is more difficult to quantify. In some markets, it has not been a factor, and the reinstatement of repayments will be comfortably met by many consumers and in many cases already has. But in other areas, particularly those where the tenant market has been adversely affected, such as areas near universities, investors have seen rents plummet and values follow.
There is another factor looming for which the outcomes remain to be seen: the proposed stamp duty reforms announced in the NSW Budget. It’s important to remember this is just an idea at this stage, with industry currently consulting with Treasury on potential impacts. Moving from an upfront cost to an annual property tax – or having the choice to do so - will have both fans and detractors, but there is much consultation still to happen on this score. There is little doubt that if implemented it will have the desired impact of greater mobility for consumers and in theory more property transactions annually.
With reform of this scope, we can expect plenty of people and associations to have their say. In the meantime, it’s all talk, though.
Let’s not forget, the market in 2020 rebounded against the odds. The value people place on property should see it defy these challenges too. After all, the fundamentals remain sound, demand is strong, supply is constrained, distressed sales are minimal, and people gravitate towards bricks and mortar whenever other asset classes present uncertainty.
Yet even with this demand, it’s difficult to see any reason for a dramatic increase in listings in 2021. More likely, we expect listings to track a similar course to that of a ‘typical’ year.
As at late November, we’re seeing the number of properties going to auction at a high point in the current cycle. Clearance rates are justifying vendors’ confidence, hovering around the 75 per cent mark.
But this heightened activity is following a typical calendar trend. It’s summer, the spring listings have come and gone, and buy-season is in full swing. We can expect activity to remain strong up until Christmas. And this year, perhaps beyond.
The usual hiatus over the Christmas and summer holiday period occurs because so many people go overseas. Obviously, this year is different, so most agents are predicting an early start to 2021. There’s already evidence of vendors engaging agents to bring their properties to market just prior to Christmas, which is something we rarely see.
More than ever before, market predictions can make forecasters look foolish, but overall, it bodes well. There are reasons to be confident that the rebound will prove sustainable. And that’s another reason for us to welcome the start of a new year, after the one we’ve just experienced.
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