Broad Market Overview, by Peter Raptis, Director Acumentis
In 1975 one of my favourite bands, Supertramp, released an album called “Crisis? What Crisis?”. The album cover depicts a man wearing sunglasses sitting on a beach chair, under a beach umbrella, whilst he is surrounded by a dystopian looking city. In ways, the property market in 2020 also continued on, oblivious to a pandemic and economic recession, the latter being the first since 1991.
They say hindsight is 20:20 vision, so whilst pundits during 2020 spent the year making forecasts, it’s now time to reflect on what actually occurred.
When the pandemic became a reality in early 2020, the usual experts came out of the blocks pretty quickly. I read all the headlines predicting a market correction through to a market collapse. It seemed week after week the forecasts become more dire. It started with a 10% fall prediction, which escalated to 20% and 30%. If that wasn’t enough, the predictions rose to 40% and 50%. Not only was I waiting for a 60% prediction; I was waiting for someone to say, “property will be worthless”. As tempting as it was to jump on the “Highway to Hell” bandwagon, I thought to myself, “shut up and keep your ear to the ground”.
As the economy was shut down and many of us were locked up at home, I, like many others hid under my desk waiting for the rumbling collapse of my beloved property market I work in. As the weeks turned into months, nothing happened. Well, nothing that represented a collapse or anywhere near any of the predictions.
As of 14 December 2020, Corelogic data revealed that home prices for the 5 major capital cities in fact rose by 1.2% year to date and 1.9% over the previous 12 months. Meanwhile in the Emerald City of Sydney, home prices rose 2.2% year to date and 3.2% from the previous 12 months.
Week after week real estate agents told me of high demand and a shortage of properties for sale. Auction clearance rates soared back up to around 75% and many suburbs began to shatter their existing record prices. Hang on a minute, I thought the sky was going to fall in, that’s what the experts told us – even with the pandemic we were told “to listen to the experts”. Even when the recession was officially announced in September and the looming “fiscal cliff” of late September was approaching, the property market seemed to gain momentum.
Why? Well of course the government pumped stimulus money into the economy, interest rates were further cut, tourism dollars were replaced by local demand as Bunnings couldn’t keep up with demand of people renovating their homes. My parents’ and grandparents’ generation of frugal living had been replaced by younger generations with a different mindset. Spend money and enjoy yourself…and that’s exactly what we did. Renovated our houses, bought Mercs, founds places in Australia to holiday in. As my old man used to say, “money makes the world go ‘round”.
That said, if you weren’t going to the Mercedes dealership, you were probably going to Centrelink. As universities and travel industries made tens of thousands of people redundant, the unemployment rate soared. Despite this, somehow most people seemed to cope, whether it was deep pockets, Job-Keeper, mortgage holidays, tapping into their Super or readjusting their lifestyle. The economic recession that we carefully avoided for decades was finally forced upon us as the government shut down the economy. Despite the doom boosters, the recession was over before we knew it, as the Reserve Bank declared in late October that we were technically out of recession.
[icon-download] Acumentis Prestige Property 2020 Report (PDF)