Australia Property Market Forecast 2021

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As we near the end of a tumultuous year, there’s one question on everyone’s lips: How will COVID affect the property market outlook in 2021 and beyond? 

It’s safe to say that 2020 did not live up to anyone’s 2019 pre-COVID forecast, but now that we’ve seen the effects of the pandemic, we can start to look at how the 2020 property market performed and how the 2021 property market might look.

Since the forecast resources below were written, the RBA changed the cash interest rate to a record 0.10% and news involving COVID-19 vaccines has been generally positive. The major banks and data analysts will likely revise their forecasts in the coming months to take these and other developments into account.

 

How did the Australian property market perform in 2020?

Thanks to the pandemic, we are living through the strangest recession on record, and it’s not over yet. Despite Australia’s successful health response, COVID-19 is still the main driver of Australia’s housing market in 2020.

How did COVID-19 affect the property market in 2020?

The Australian economy took a large hit this year following the health response. The Australian economic quarterly decline was the largest in 60 years, with a 7% fall in the June quarter and a 6.3% fall over the year.

GDP growth graph

Surprisingly, this has not affected the property market outlook as strongly as most experts expected. According to QBE, the property market’s resilience is due to:

  • unprecedented government stimulus
  • mortgage repayment deferrals
  • interest rate cuts
  • plus external circumstances causing the recession in the first place.

Nine months into the pandemic, Australian property values have eased slightly but annual price growth is still positive, thanks to the strong market turn in the latter part of 2019. Have a look at the tables below, which list growth to the month of August 2020. 

Check out our Property Market Outlook 2020 for more on Australia’s fastest market turnaround in history in 2019.

Australia Property Market Outlook - Aug 2020
Source: My Housing Market, Dr Andrew Wilson
Market Forecast – capital city median asking prices Aug 2020
Source: My Housing Market, Dr Andrew Wilson

Government measures mean COVID’s effect on the property market is delayed, so we are only now seeing the effect of early COVID-related disruptions.

On average, there has been house price growth in every capital city over the year to August 2020, and modest losses to strong growth in units in the same cities.

The Australian property market has not yet felt the full effect of the COVID-19 recession, but we can expect to start feeling it in 2021.

 

National market forecast 2021

While COVID remains a part of global daily life, it will continue to affect the property market through its effects on:

  • Economic activity
  • Employment rates
  • Migrant numbers
  • Political unrest
Net overseas migration
Net overseas migration

Source: QBE Australian Housing Outlook 2020-2023 

Migrant numbers are not expected to increase until the Australian Government opens international borders, which is likely in the second half of 2021.

As a result of migration collapse, we will see continual decline in dwelling commencement throughout 2021 and into 2022 and likely falls in property values in all states, with Melbourne, Sydney and Hobart potentially experiencing the highest forecasted falls between 6.5% and 7.8% (QBE Housing Outlook 2020).

Market Forecast – median prices
Median prices by capital city – June 2020
Market forecast – median prices
Source: QBE Australian Housing Outlook 2020-2023

This is in line with Westpac’s Chief Economist, Bill Evans’, prediction of an average 5% fall in house prices in 2021 with a positive 15% surge in the following 2 years. 

Westpac’s positive forecast is supported by the low interest rates (which they correctly predicted would go even lower), continuing support from the government, and a view that the economy would strengthen towards the latter end of 2021 and beyond.

Property cycle stages 2020–2023

Bill Evans predicts four key stages in the 2020–2023 property cycle:

  1. Price falls: we experienced this stage as prices fell this year in response to COVID.
  2. Stabilising of prices: prices in the December 2020 and March 2021 quarters should stabilise as stimulus and government measures remain in effect.
  3. Softening of prices: lenders will begin easing loan deferrals in the June and September 2021 quarters and expect to see distressed mortgages.
  4. Price increases: low interest rates, early economic recovery, policy stimulus and improved affordability will see a cumulative increase of 15% from December 2021 over two years.

Massive falls in property values no longer expected

Gareth Aird, head of Australian economics at Commonwealth Bank, agrees that most states in Australia have avoided the massive falls in prices predicted earlier in the pandemic. The CBA’s forecast agrees with Westpac’s assessment of falls to June 2021 with their own -5.1% national house value prediction, and also expect the beginnings of growth once again towards the end of 2021.

Market Forecast – house prices

Not only are modest falls expected, but prices are also expected to rebound strongly in the second half of 2021. The consensus is that Australia’s response to COVID-19 has minimised its impact on the Australia property market outlook (2021), as have the 2019 and 2020 RBA cuts to the cash rate. (The New Daily)

The major banks have based current forecasts on the assumption that no further lockdowns will occur in Australia and that national economic activity will begin recovery.

Mortgage deferrals come to an end

It was a relief to many homeowners when banks offered 6-month repayment holidays as the country began locking down. But many have been wondering what will happen once deferrals come to an end.

Check out our article on How to Manage Mortgage Stress & Loan Deferrals to learn more. 

According to the Australian Banking Association, banks are assessing at least half of the 900,000 current loan deferral customers between now and the end of October. The ABA estimates that over 200,000 of these customers resumed repayments in July and August.

Customer assessments will determine whether customers:

  • Resume mortgage repayments as normal
  • Restructure or vary loans, including paying interest only or extending the loan term.
  • Are granted an extra 4-month repayment holiday
  • are offered tailored help, as they can no longer afford their loan long-term. (ABA

According to BIS Oxford Economics chief economist, Dr Sarah Hunter, prices will not fall dramatically as loan deferrals come to an end. She expects the current pace to continue as homeowners consider their options, rather than rushing to sell. 

 

Reduced popularity of inner-city living

COVID stands to change the way we live in many ways, but one trend is driving property sales in Australia’s regional locations: the increasing number of people working from home. The positive effect of this phenomenon will:

  • reduce pressure on capital city infrastructure
  • improve affordability of inner-city living
  • create more choice for buyers
  • boost population in regional areas.

Now that we’ve seen how effective home offices can be, people are opting to move away from potential COVID-19 hotspots, where many were caught in claustrophobic lockdown conditions, instead opting for country living with all the benefits it brings.

Despite COVID-19 measures reducing migrant numbers and creating economic challenges, the property market has proven resilient thus far and is forecasted to remain so with falls of 5% in 2021 and strong recovery thereafter.

Major Australian city forecasts 2021

NOTE: The changing COVID-19 landscape lends itself to a dynamic Australia property market outlook for 2021 and beyond. We have based this outlook on major bank forecasts and that of the QBE insurance group. Since their latest forecasts, the RBA has lowered the interest rate and we are tracking closer to a successful vaccine. We expect forecasts to change in the coming months as we learn more about the effects of these changes.

The pandemic has affected all Australian capital city forecasts somewhat, but Sydney and Melbourne have been hit hardest. They have:

  • received more economic damage
  • felt more of the collapse of net overseas migration
  • had poorer health outcomes during the pandemic.

This will likely see property prices softening more in Sydney and Melbourne, with some other Australian cities expected to outperform despite the pandemic. 

Australia Property Market Outlook: Westpac property prices to June 2021
Source: Westpac, Business Insider Australia

CBA and Westpac agree: the property market nationwide should start recovering from June 2021.

Net overseas migration

Migration to Australia collapsed early on in the pandemic with migration numbers falling to near zero.

Despite government stimulus in the construction industry, low levels of migration is causing uncertainty about property commencement, which isn’t expected to start increasing until 2022.

Population growth will remain low until Australian borders are open and migrant numbers begin to increase.

Sydney and Melbourne take almost 70% of migrants to Australia, and it’s clear their property markets are more severely affected. According to CoreLogic data, property prices fell 4.3% in Melbourne and 2.6% in Sydney between April 2020 and August 2020.  

Brisbane, Perth and Darwin had falls of between 0.7% and 2.2%, while Adelaide, Hobart and the ACT had rises between 0.3 and 1.8% during the same period. 

Property value calculator by capital city 2021

Using the Commonwealth Bank’s 2021 forecast, Which Real Estate Agent has created a property value calculator that estimates your property’s value at the end of December 2021.

Simply find your closest capital city and enter your property’s estimated value as at December 2020.

$0.00

2021 Property Value Prediction

If you are looking to sell, ensure you talk to a few local agents to get an accurate idea of how your property’s value has changed over the course of 2020.

 

Sydney property market forecast 2021

Expected Median House Price in 2021: $1,031,000

Expected Median Unit Price in 2021: $713,000

In March 2020, Sydney house prices were up by 14% from the previous year, but the initial COVID-19 shock halted this growth in its tracks. Sydney saw most of this growth in the inner and middle markets, with the outer region growing by just 6.9%. (QBE Housing Outlook 2020)

The June quarter 2020 saw:

  • price falls of 4.7% (houses) and 3.7% (units)
  • vacancy rates rise from 3.3% to 4.1% for houses
  • vacancy rates rise by 13% for inner city apartments.

The Sydney rental market is experiencing oversupply due to the collapse of net overseas migration this year. Rents are already falling, while vacancy rates are continuing to rise. (QBE Housing Outlook 2020)

CBA and Westpac predict a fall of approximately 5% in Sydney by June 2021 before prices begin trending upwards.

June 2021 and beyond

Sydney will likely experience continued price falls to June 2021. It is widely assumed that Australian borders will open in the second half of 2021. If so, the Australian economy will begin to recover, as will the Sydney housing market. By 2023, expected median house prices will reach $1,090,000, which is still 6% less than in March 2020.

Migration affects unit prices more strongly than house prices and, according to QBE, unit prices will fall quicker in the short-term. Unit commencement will likely continue to fall through to 2023, with fewer unit completions than in any year since 2013. Despite this, unit prices are expected to reach pre-pandemic levels by 2023.

Melbourne property market forecast 2021

Expected Median House Price in 2021: $783,000

Expected Median Unit Price in 2021: $542,000

Before its second wave of COVID-19, Melbourne was on track to suffer modest falls in house and unit prices. However, the city has just come out of the most severe Australian lockdown resulting from the worst COVID-19 outbreak in the country.

The first wave saw falls in the 2020 June quarter of:

  • -4.0% (houses)
  • -1.3% (units) 

This is expected to worsen through to 2022 as the effects of the second wave filter through. Once the border opens, the oversupply of houses will likely be absorbed by migrants. However, unit completions will take years to come back to pre-pandemic levels with the HomeBuilder program focusing largely on houses. (QBE Housing Outlook 2020)

By mid 2021, house prices should fall by 7.5%, with unit prices falling by 7.7%. This will begin trending upwards with expected median house and unit prices reaching $830,000 and $589,000, respectively, by 2023.

CBA and Westpac predict Melbourne property prices to fall between 10% and 12% by June 2021 – a more severe drop than other states due to the second wave and corresponding lockdown. 

 

Brisbane property market forecast 2021

Expected Median House Price in 2021: $540,000

Expected Median Unit Price in 2021: $394,000

Despite Sydney and Melbourne experiencing the worst of pandemic effects, it’s clear that all states continue to be affected by the same forces, including:

  • Collapse of migration
  • Economic damage
  • Global political unrest

The Brisbane property market has not escaped the COVID-19 downturn, with prices falling 3% (houses) and 3.6% (units) in the June 2020 quarter. However, housing affordability is better than in Sydney and Melbourne and Queensland’s strong health response has ensured a brighter forecast for Brisbane’s property market. 

Brisbane was heading back into undersupply prior to the pandemic, but is now expected to have an oversupply before achieving a balanced market in 2022/2023.

According to QBE, prices will likely fall 4.2% (houses) and 4.5% (units) in 2020/2021 due to:

  • the highest unemployment rate in 25 years
  • slow population growth due to closed borders.

In 2021/2022, once income and employment levels return to normal and migrant numbers increase, the Brisbane property market will slowly recover. Expected median house and unit prices should reach $570,000 and $422,000, respectively, by 2023. (QBE Housing Outlook 2020)

CBA and Westpac forecast a more modest fall in prices of 2–2.5% by June 2021 before prices rebound strongly.

Perth property market forecast 2021

Expected Median House Price in 2021: $483,000

Expected Median Unit Price in 2021: $343,000

The Perth property market was just beginning to recover from the previous downturn when COVID-19 hit. The pandemic did not affect the city as strongly as cities on the east coast due to:

  • earlier easing of lockdowns and restrictions
  • fewer cases of COVID-19
  • population growth not being tied to migration
  • the recent post-mining-boom downturn.

Thus, the Perth property market stands to recover strongly once it falls just 2.9% by June 2021 (houses and units). The median house and unit prices are expected to grow by 8% and 6.8% between June 2020 and June 2023, putting their median values at $535,000 and $378,000, respectively.

CBA expects prices to fall 0.9% by June 2021, while Westpac maintains that prices will hold.

Adelaide property market forecast 2021

Expected Median House Price in 2021: $489,000

Expected Median Unit Price in 2021: $384,000

According to QBE, Adelaide’s property market is renowned for stability compared to other Australian cities. This is due to:

  • public sector work preventing any large jumps in unemployment
  • migration having little effect on population growth

This can be seen in its house price growth of 1.6% in the June 2020 quarter. From this peak to March 2021, prices will likely fall 2.8%

Unit prices will suffer marginally more than house prices, with a drop of 3% by March 2021. Demand for units is weak in Adelaide, resulting in a higher concentration of oversupply and a higher fall in prices.  (QBE Housing Outlook 2020

CBA and Westpac predict prices to increase by 0.2% and 2% respectively in houses and units, by June 2021.

2021 and beyond

The Adelaide property market will experience a modest recovery of 3% and 4% in 2021/2022 and 2022/2023, with expected median house and unit prices to reach $530,000 and $414,000, respectively, by 2023.

Hobart property market forecast 2021

Expected Median House Price in 2021: $522,000

Expected Median Unit Price in 2021: $447,000

Unlike some other Australian cities, Hobart relies heavily on tourism and international students. With both severely affected by the pandemic, the Hobart property market is set to see significant falls through to June 2021.

However, the government has softened the blow by increasing stimulus measures during the initial COVID-19 shock, resulting in price falls of just 1.8% during the June 2020 quarter. As these measures reduce in the latter part of 2020, Hobart will begin to feel the full effect of the pandemic.

Median house prices are expected to fall 11.2%, the largest drop nationwide, by June 2021. In contrast to other states, which will begin to recover in mid 2021, Hobart will not likely see strong recovery until 2022.

The Hobert property market will experience a modest recovery by 2023, with median house and unit prices reaching $535,000 and $489,000, respectively.  (QBE Housing Outlook 2020

CBA expects prices to climb by 0.4% by June 2021.

Canberra property market forecast 2021

Expected Median House Price in 2021: $726,000

Expected Median Unit Price in 2021: $450,000

Similarly to Adelaide, Canberra’s economy relies heavily on public sector jobs, creating a relatively stable property market. This has led to annual median house price growth of 4.2%, despite the effects of COVID-19.

As stimulus measures wind back and unemployment rates rise, Canberra will begin to see property prices fall, but not significantly. By June 2021, prices will fall just 1.8% before rebounding strongly into the second half of 2021 and beyond.

Expected median house and unit prices will reach $786,000 and $482,000, respectively, by 2023. (QBE Housing Outlook 2020

CBA predicts a price increase of 2.3% in Canberra by June 2021.

Darwin property market forecast 2021

Expected Median House Price in 2021: $441,000

Expected Median Unit Price in 2021: $269,000

The COVID-19 pandemic has affected Darwin the least of all Australian states due to:

  • relatively few COVID-19 cases
  • earlier relaxation of restrictions
  • government stimulus.

This resulted in a property price fall of just 0.2% in the June 2020 quarter. Despite the tourism industry being largely shut down and LNG projects being placed on hold, new defence and public projects, plus continued government stimulus programs, will somewhat protect the economy.  

Falls of 2.8% (houses) and 3.8% (units) will likely occur by June 2021, with significant growth expected over the two years to June 2023. Expected median house and unit prices will reach $484,000 and $295,000, respectively, by 2023. (QBE Housing Outlook 2020

CBA forecasts a 0.2% fall in prices by June 2021.

Long-term Australia Property Market Outlook: 2022-2023

As described in the major city forecasts, Australia’s economy and nationwide property market should be fully in recovery by 2023. Following price falls to June 2021, prices are expected to begin a modest recovery to June 2022 and strong recovery thereafter.

This relies on a COVID-19 vaccine and the Australian border reopening. If this occurs later than expected, it will push back the property market’s recovery.

Although CBA and Westpac agree that growth will be likely over the next few years, Westpac is predicting a stronger recovery than CBA. Despite some distressed selling in the June and September quarters, Westpac predicts Brisbane prices to increase by 20% in 2022/2023, with Perth following closely behind at 18%.

Australia Property Market Outlook: dwelling prices
Source: Westpac, Business Insider Australia

According to Evan and Hassan, Westpac’s prediction is based on:

  • Sustained low rates
  • Ongoing regulator support
  • Improved affordability
  • Sustained fiscal support (federal and state governments)
  • Strengthening economic recovery
  • A COVID-19 vaccine in 2021

QBE forecast growth 2020–2023

QBE forecasts a much more modest recovery in most markets by 2023, and estimates house prices will fall in Sydney, Melbourne and Hobart. 

StatesHouse Prices (%)Unit Prices (%)
Sydney-1.2+1.1
Melbourne-1.9+0.3
Brisbane+0.9+2.1
Perth+7.5+6.8
Adelaide+5.3+4.9
Hobart-3.8+0.8
Canberra+6.3+4.9
Darwin+6.6+5.7

Source: QBE Australian Housing Outlook 2020–2023

Is it the right time to sell?

This will depend on how your area was affected by the events of 2020, what type of property it is and whether forecasts are working with or against you. If you are looking into receiving a property appraisal or want to start exploring selling your property, a good agent should be your first port of call.

Compare agents now to receive advice from experienced, local agents that can help you get an idea of your property’s value, and then achieve your selling goals.