Purchasing a home is comparable to engaging in a challenging activity. In order to win the game, you must first master the guidelines, then prepare physically before taking the court, and finally demonstrate dexterity while overcoming obstacles.
In the year 2021, "winning" will require understanding how you stack up against lender qualifications, preparing to compete with other buyers, and successfully navigating a socially distant homebuying process until vaccines put an end to the pandemic.
The housing market in 2020 was plagued by low inventory, rising home prices, and endless bidding wars, which made it difficult for some individuals who were interested in purchasing a home to get their foot in the door. Will there be any differences in 2021? Or, do you think now is a good time to purchase a home?
If you've been thinking about buying a home but haven't pulled the trigger yet because the housing market in 2020 is so competitive (not to mention the other difficulties that 2019 brought), you might be wondering the same thing.
Even though there is no crystal ball, a picture that is starting to emerge of what the housing market may look like this year is starting to become clearer.
The 2021 Housing Market: An Overview
In the past year, interest rates have plunged to all-time lows, and it's likely that this trend will continue for at least the next couple of years.
This is wonderful news for borrowers because it will result in lower monthly mortgage payments and larger budgets for the purchase of homes. On the other hand, low interest rates have resulted in an increase in the number of bidding wars and have caused home prices to rise. House hunting has become more competitive as there are fewer homes available on the market to choose from. When you finally find the house of your dreams, you'll almost certainly need to make a quick decision. You should also determine in advance how much more than the asking price you are willing to pay for the item in the event that it comes to that.
Buyers may be able to qualify for and afford more expensive homes if interest rates are low. However, this also results in increased levels of competition in the market. Since everyone now works, studies, and socializes from their living rooms, the massive shift toward working from home may also have you thinking about a place with sufficient space to accommodate a home office or spread out a little bit now that everyone works from their living rooms.
Work-from-home policies have enabled a large number of people to reevaluate their living situations, enabling them to move to areas with lower living costs or that are more aesthetically pleasing without having to risk losing their jobs. The year 2021 might be the one in which you make your first purchase of a home, regardless of the motivations that brought you to the decision to enter the housing market. Your dream home can become a reality when you work with MJS Construction Group, because we offer the finest selection of dual occupancy options.
Australian Property Market Forecast 2021
Even though summer is coming to an end, it appears that housing prices in Australia are still on track to skyrocket. The latest information on the housing market reveals that home prices increased by an astounding 2.1 percent in the month of February (3 percent in Sydney).
According to recently released statistics from the Australian Bureau of Statistics (ABS), the month of January saw a significant increase in the number of people purchasing homes. The amount of price pressure being exerted is being amplified by first-time buyers.
The Commonwealth Bank of Australia has predicted that house prices in Australia will increase by 16 percent over the course of the next two years, which they refer to as a "housing market boom." Gareth Aird, head of Australian economics for CB, anticipates that housing prices will increase by 9 percent in 2021 and by an additional 7 percent in 2022.
Is this a House Price Bubble?
While housing markets in the UK, US and Germany are heading into boom periods, the suddenness of Australia’s demand for housing at the end of the regular buying season is remarkable. The surge can be attributed to a number of factors, one of which is the fear of missing out.
The increase in prices has a significant impact on people's ability to afford housing, which is an ever-popular topic. The cost of living in Australia is consistently ranked among the highest in the world. The Australian cities of Sydney, Melbourne, Brisbane, and Adelaide are among the top ten most expensive places to call home in the world. Limits placed on the development of housing on the urban fringe are being blamed for the rapidly escalating price challenges in these cities.
Frequently Asked Questions About Tenants
This shows grade level based on the word's complexity. a person or group that rents and occupies land, a house, an office, or the like, from another for a period of time; lessee. Law.
The priority for most landlords will be to find a long-term, reliable tenant who pays their rent on time and treats the property as their own. When choosing a tenant, you'll need to carry out a comprehensive reference check.
Monthly income at least 5 times higher than the rent you're charging. Good credit score. Steady history of employment, without regular upheaval. Complimentary references from previous landlords and current employer.
Trustworthy. Establish trust between you and your tenants by making sure you are readily available in case of emergencies and act quickly to resolve any issues raised. Dealing with requests or problems promptly will make sure your tenants are confident in your abilities as a landlord.
It's also a good idea to include this like employment history, credit history and several references in your letter. Landlords aim to ensure their tenants are responsible and will take care of the property, follow the rules and pay rent and fees on time.
Is Homeownership The Better Option For You?
More than two thirds of Australians polled in a recent Finder survey believe that the conditions are right to purchase a home, which is a level of confidence that has not been seen since the beginning of the pandemic, and there are good reasons for this belief.
Many people who are interested in purchasing property now have the opportunity to do so thanks to an influx of government grants and interest rates that are at record lows.
However, many industry professionals caution that buying a home in a hurry in order to qualify for these government-funded assistance programs could, in the long run, cause more problems than it solves. The purchase of a home, much like the making of any other significant financial investment, calls for adequate planning and preparation. The following is a list of potential benefits and drawbacks of being a homeowner.
It gives you a sense of security and freedom.
When you own your own home, you have the peace of mind that comes with knowing that you won't have to worry about being kicked out of your residence as long as you keep up with your mortgage payments. You do not need to be concerned about any rent increases, changes in the terms of your lease, or getting along with your landlord in any way. Another advantage of having your own place is having the freedom to make improvements and alterations to it, which can ultimately result in an increase in the home's value.
Properties tend to increase in value over time.
According to the most recent data released by CoreLogic, housing prices in Australia have not only risen above their pre-pandemic levels, but they have also reached a "fresh record high," shattering the previous peak, which was recorded in September of 2017. This is the kind of information that many homeowners have been hoping to hear because an increase in market prices typically results in an increase in the value of their properties.
On the other hand, if the housing market is experiencing a downturn, property values may also decrease. When something like this occurs, it is imperative to maintain composure and keep in mind that purchasing a home is a long-term investment.
You can build up your equity with each payment.
When you make your mortgage payments each month, the equity in your home also increases. You are able to tap into this equity and use it to fund significant personal spending, such as the education of your child, the purchase of a new vehicle, the renovation of your home, or the purchase of an investment property.
It entails heavy financing.
The extensive amount of financing that is typically involved is what makes purchasing a home a challenging endeavor for many people. You need to give careful consideration to a number of upfront and ongoing costs if you want to determine whether or not purchasing a home is feasible for you financially. These are the following:
- The deposit is typically equal to twenty percent of the total value of the property.
- If you do not have enough money for a deposit of twenty percent of the home's value, you may be required to pay for something called lenders mortgage insurance, abbreviated LMI.
- Costs associated with establishing a loan
- Stamp duty
- Connection fees for utilities
- Expenses incurred for legal services, such as those charged by a solicitor or conveyancer
- Mortgage repayments
- Tax on land
- Council taxes and fees charged by body corporations
- The costs of repairs and maintenance
The value of your property may decrease.
A decline in the overall value of the housing market, as was mentioned earlier, can have a detrimental effect on the value of your property.
You Are Buying A Property To Pay Less Tax.
You shouldn't fall for the trap of buying secondary properties just because they have high depreciation allowances and can generate a lot of negative gearing.
These new properties typically come at a premium price and don't deliver significant capital growth for many years after they have been on the market.
Negative gearing, in my opinion, is not an investment strategy; rather, it is a short-term funding strategy that makes sense only when applied to the purchase of high-growth investment properties that are excellent.
Typically, these are well-established single-family homes, townhouses, or apartments situated on desirable streets and in prime locations within the middle ring suburbs of our three major capital cities.
You Are Driven By Fomo – Fear Of Missing Out.
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When contemplating the purchase of a home for personal use or an investment property, it is natural for humans to experience a range of feelings, including excitement, anxiety, and nervousness.
When you invest based on your emotions, however, you are more likely to make poor investment decisions. It is precisely this kind of emotion that causes investors to fall victim to property marketers and spruikers who will offer you a way to become wealthy very quickly.
You Want To Get Rich Quickly.
Investing in real estate is a venture that is undertaken for the long term.
According to my research, it takes the typical real estate investor thirty years to achieve financial independence.
You Don’t Understand How Property Investment Works.
The fact that someone owns a home or has previously lived in a home leads a lot of people to believe, incorrectly, that they understand property investment.
As a result, they wind up purchasing a home that is situated in close proximity to their desired location for living, retirement, or vacationing.
When it comes down to it, these are all irrational reasons to buy a property rather than selecting one based on the fundamentals of a good investment.
On the other hand, successful investors have devised a robust investment strategy that not only complements their risk profile but also assists them in accomplishing their long-term objectives and is one that has been able to withstand the test of time.
You’re Not Financially Fluent.
I discovered that many investors are interested in purchasing investment property in the hope that it will help them increase their cash flow. However, if these investors do not possess the necessary financial discipline and skills for managing their cash flow, purchasing investment property will only serve to compound their existing problems.
You’re Looking For A Multi-purpose Property.
If you are purchasing a property with the intention of building wealth, but you also want it to serve as your future home, a place where you can spend part of the year on vacation, or a location where you can retire in the future, then you are probably expecting too much from a single piece of real estate.
Your Finances Are Not For Money Savings.
Investing in real estate is primarily a game of finance, with some real estate elements thrown in for good measure.
In order to enter the real estate market, you need to have a secure job, profession, or business that generates a consistent income; you also need to be appealing to financial institutions so that they will lend you money; and finally, you need to have enough money saved up in a financial cushion to get you through the inevitable wet days that lie ahead.
You do not currently have sufficient funds (yet!).
In the event that you are unable to purchase an investment-grade property due to the fact that you have not been able to save enough money for a down payment or because you are unable to afford the monthly payments on a mortgage, I would recommend that you purchase a secondary property instead. In that case, you should hold off and look into purchasing a property that is suitable for investment.
You Are Trying To Time The Market Or Find The Next Hotspot.
It is true that real estate markets go through cycles, and while it would be ideal to make a purchase close to the market's low point or to identify a location that is poised to become the next hotspot, the landscape is littered with investors who tried to time the market and failed.
Instead, the best time to invest in real estate is when your finances are in order and you are in a position to buy a property that is suitable for investment.
Keep in mind that Australia does not have a monopolized real estate market, which means that there will always be opportunities available somewhere. Are you looking for construction companies? No need to look any further! You are in good hands with MJS Construction Group.
5 Predictions For The Property Market In 2021
The level of demand to make purchases will continue to be at a high level.
In spite of the fact that the economy was in the midst of a recession, with rising unemployment and business closures, the number of people interested in purchasing residential properties for sale skyrocketed in the year 2020.
Many Australians are finding themselves unable to spend their money in the usual manner because their household savings have reached levels not seen since the middle of the 1970s. The cost of borrowing money is currently at an all-time low, and governments are providing financial support to the economy through programs such as the HomeBuilder Incentive Program, programs designed to encourage first-time home buyers, and stamp duty relief in some states. All of these things are making it more appealing for Australians to think about purchasing property.
Buyer demand will likely remain near record high levels in 2021, driving strong demand for property purchases. This is because the majority of stimulus measures are expected to continue into 2021 and interest rates are expected to remain low for several years.
There will be rental markets that continue to be difficult.
During the pandemic, the housing market has been particularly challenging for renter-focused, inner-city unit markets; however, this is by no means the case everywhere.
Inner-city apartment rental markets are extremely dependent on people migrating to a new city, regardless of whether those people are coming from overseas for the purpose of studying or working or are coming from interstate for whatever reason. In the year 2020, such migration drivers had been broken as a result of the pandemic, and inner-city apartments have seen a significantly reduced demand, which has consequently led to price falls.
Although there has been a decrease in demand for inner-city apartment rentals, there has been an increase in demand for rentals in housing markets outside of capital cities and in significant regional areas.
As long as Australia does not reopen its borders to international travelers in 2021, it is likely that the demand for apartments in the nation's inner cities will remain weak. When a tenant's lease is up for renewal, they may start looking for a new place to live that is either better or more affordable; consequently, there will be significant competition among landlords to secure tenants.
Activity among first-time buyers will decrease, while activity among investors will increase.
In 2020, there were fewer investors, which contributed to historically low borrowing costs and government incentives, which in turn boosted demand from first-time homebuyers.
As a direct consequence of this, the value of lending to first-time home buyers reached a historic high in October 2020 and was higher by 48.6 percent compared to the previous year.
During the past few months, the value of lending money to investors has been lower than the value of lending money to people who are buying their first home. Recent weeks, however, have shown some signs of improvement in this regard.
As a result of the HomeBuilder scheme being extended by the federal government until March 2021, it is anticipated that the number of people purchasing their first homes will continue to be relatively high over the next few months. However, because demand from this sector has been brought forward as a result of the program, it is highly likely that there will be a significantly lower demand from first-time home buyers once the program is terminated.
On the other hand, there hasn't been much lending from investors. In spite of this, residential property investment is likely to become more appealing in 2021 as a result of historically low interest rates and low returns across the majority of asset classes.
The typical stock that investors have targeted in the past, such as apartments with one or two bedrooms located in the heart of the city, is unlikely to be representative of the kinds of real estate that they will buy in the near future. When demand is on the rise, investors are more likely to focus their attention on housing markets in established neighborhoods, new housing developments, and regional markets.
The low number of people moving overseas will have an effect on the construction of new homes.
Over the past few years, demographics have been a primary factor in the demand for housing. While there has been a general downward trend in birth rates, Australia has maintained a relatively high rate of immigration from other countries.
In most cases, a person who wants to buy real estate before they become citizens will have to start from scratch and buy a brand-new residence. Because of this, a significant amount of the demand for new homes and apartments is being met by purchasers who are not citizens.
The closure of international borders throughout this year and for what appears to be a significant portion of 2021 will present difficulties for the new housing sector.
The government's stimulus programs have attempted to compensate for those difficulties. On the other hand, rather than apartments, the program's primary focus has been on the acquisition of new land or house and land combinations. The new apartment sector in Victoria is given a boost thanks to the stamp duty relief that was announced as part of the state budget for that state.
The supply of apartments has been reduced as a result, although it was already on the decline prior to this year. As a result, apartment developers are increasingly delivering smaller-scale, owner-occupier style developments with significant local amenity.
The shortage of people moving to Australia will ensure that the new housing market remains under pressure. While the borders remain closed, it is likely that state and federal governments will continue to provide support measures for these sectors. Explore our selection of reputable home builders in Melbourne to find the perfect one for your ideal home.
The cost of real estate maintains its upward trend.
The housing market in Australia has proven to be remarkably resilient throughout the recession in the year 2020. In recent months, there has been an upward trend in property prices, which can be attributed to the strong demand as well as the historically low interest rates.
If there is not an unexpected increase in the volume of stock that is listed for sale in 2021, it does not appear likely that these conditions will have changed.
Although there is a good chance that the amount of stock that is available for purchase will grow, it is also quite possible that it will not grow to such an extent that it will alleviate the upward pressure on prices.
It appears that 2021 will be a prosperous year for the housing market as a whole; however, certain localities will perform significantly better than others.