The coronavirus pandemic has badly hit several if not all industries in many countries around the world. Unfortunately, the housing sector is not an exception. In 2020, mortgage rates saw new lows over the past months, hitting records left and right.
Good thing is along with the new year comes renewed hope for the housing industry. In the United States and the United Kingdom, housing economists say that mortgage rates and housing prices might go up as economies recover with the development of vaccines for coronavirus.
The Australian property markets expect to mirror some UK and US housing sector trends, with rising home prices in all areas other than the big cities. However, analysts say that mortgage rates in Australia are unlikely to increase in the next three years.
Let’s take a deep dive into these forecasts for the housing industry in 2021.
Mortgage rates to remain steady in Australia
According to forecasts by the National Association of Realtors in America, mortgage rates will rise by 3% in 2021. The Mortgage Bankers Association supported this prediction, saying rates will average 3.3% this year.
Locally, the Reserve Bank of Australia assured the public on various occasions that the rates won’t rise until both inflation and employment are steady and within the target range. Analysts say it’s unlikely to happen at least within the next three years.
If you’re a mortgage holder or aiming to buy a house soon, this is good news! Based on data by Mozo, the average fixed rate is at 2.35% per annum. The average variable rate is a bit higher at 3.31%.
Rising home prices
From March to September 2020, we saw home prices and sales take a downward trend in Australia. But hope is not lost for the housing industry as seen from last year’s November sales.
Average home prices in Australia grew by 4% overall with Sydney and Melbourne seeing an increase of .4% and .7%. According to CoreLogic Head of Research Eliza Owen, she expects to see a continued improvement in house pricing in the first half of 2021.
The increase in home prices is attributed to Australia’s low mortgage rates, proactive response to the Covid-19 crisis, subsidy for job keeper wage and the slow but steady reopening of businesses. Fewer homes are also for sale, and first time home buyers are once again active in the marketplace.
Higher Rents Expected
Data Property Leader CoreLogic says house rents are improving better than unit rents since April of 2020.
Similar to the UK and America, Australia’s unit rents went down by -5.4% since March while house rents have increased by 1.1%. The downward trend in unit rents was attributed to a decline in Melbourne and Sydney’s numbers. This meanwhile is due to their high number of joblessness and with international renters who encountered lockdowns.
With the reopening of international borders and resume tourism of tourism trades, experts suggest that we will see rent prices grow in 2021.
Rise of Cheaper Apartments
Wakelin Property Advisory director Jarrod McCabe said the suburbs where international students used to live might become unstable. These include middle-ring suburbs near universities and other properties where investors used short-term accommodations into long-term apartment rentals.
This instability spells opportunity because it may equate to relatively cheaper properties. However, McCabe cautioned home buyers and investors to carefully evaluate whether the type of property you’re eyeing is the right one for you.
Lenders to offer something beyond pricing
Fierce competition is expected in the home loan space in 2021. As a result, banks and lenders may opt to go beyond pricing as a strategy to attract borrowers. This is exciting news for borrowers as banks might offer cashback deals and waivers on insurance for first time home buyers.
Maximise investment opportunities in 2021
Whether you’re looking to buy your first home or looking to expand your portfolio this year, Ripple Finance is here for you.
We offer several quality finance solutions focused on assisting you in maximising your investment opportunities. We understand that each need is unique, and we strive to find suitable solutions accordingly. We work with you to provide a hassle-free experience. We make home loans easy with access to hundreds of different options from a panel of Australia’s lending leaders.
When it comes to your financial decisions, the right advice is critical. At Ripple Finance, we help take the stress out of financial lending.