What do economists forecast for the property market in 2021?

By Emily Ng

It’s fair to say it’s been a challenging year for the Australian property market, with buying and selling put on hold, economic uncertainty and consumer confidence taking a dive in the midst of the pandemic.

But now with the worst of the restrictions behind us, we reflect on the resilience of the Australian property market which has overall held steady throughout the pandemic and is now showing signs of recovery. 

With consumer sentiment at a ten year high, property prices posting consecutive monthly rises, GDP in positive territory and a vaccine on the horizon, experts are predicting strong performance in the coming year.

We understand that forecasting the future is difficult, but to get an idea of what 2021 may hold, we take a look at what economists from NAB, SQM Research and Westpac have to say, and if there is a general consensus among them.

 
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Sydney property price forecast 2021

NAB 

Group Chief Economist, Alan Oster 

In their latest Quarterly Australian Residential Property Survey released in November, NAB reveals an improved outlook for house prices. Growth in Sydney is tipped to be slightly less than the other capital cities with an outlook of +4.4 per cent in 2021 and +6.0 per cent in 2022. 

Group Chief Economist, Alan Oster does note in his report that the sharp slowdown in population growth due to border closures is a key risk to house prices in Sydney. 

Subsequently, Mr Oster expects weakness in the rental market which will also weigh on the investor segment, particularly in inner-city Sydney apartments which may place further downward pressure on prices. 

2021: Growth of +4.4 per cent for houses and units

2022: Growth of +6.0 per cent for houses and units

SQM Research

Managing Director, Louis Christopher  

According to the Housing Boom and Bust Report 2021, SQM Research Managing Director, Louis Christopher also predicts growth in Sydney, particularly in houses. 

In an interview on the 13th of December, Mr Christopher told industry expert Tom Panos that the demand for freestanding houses has increased due to people wanting more space and thus moving to regional areas. 

“People have been looking to get away from the inner-city area due to coronavirus. We first noticed this trend from around the end of March when rental vacancy rates started skyrocketing in the Sydney CBD. When I say skyrocketing I mean they got above 10% and they moved to the outer rings to areas like the Blue Mountains, Central Coast and even further afield.” 

The optimistic outlook is based on the quick recovery in Sydney prices so far as well as positive indicators suggesting the market is on the rebound.

“Leading indicators such as auction clearance rates and asking prices for Sydney are suggesting a forming recovery in the middle and outer rings. 

“Inner city units continue to record price falls for which we do not expect this to change. The overall Sydney forecast is for a 7 per cent to 11 per cent dwelling price increase. 

“The proposed NSW Stamp Duty/Land Tax opt-in for home buyers will be stimulatory to the housing market next year,” he said. 

This forecast assumes ongoing support from the Federal Government and Reserve Bank of Australia over 2021, as well as a progressive rollout of  Covid-19 vaccine. 

2021: Growth of +7 to +11 per cent for houses and units

Westpac

Chief Economist, Bill Evans and Senior Economist, Matthew Hassan 

Westpac economists Bill Evans and Matthew Hassan are also optimistic in Sydney property prices with the latest forecast predicting a climb of +14 per cent in the next two years. 

This is revised from the previous forecast in April which anticipated Sydney prices to drop by -10 per cent. 

The bank said this revised forecast and optimistic prediction for the coming year is due to many factors which will all work to strengthen the market.  

“The recovery will be supported by sustained low rates, which are likely to be even lower than current levels; ongoing support from regulators; substantially improved affordability; sustained fiscal support from both federal and state governments; and a strengthening economic recovery,” the economists wrote

2021-2023: Growth of +14 per cent for houses and units 

Melbourne property price forecast 2021

NAB 

Group Chief Economist, Alan Oster 

NAB forecasts Melbourne property prices to be weaker than other Australian capital cities in the next two years. 

Mr Oster anticipates growth of +3.6 per cent in 2021 and +5.4 per cent in 2022 with a key risk in house prices being the sharp decline in population growth due to international border closures. 

This in turn will cause weakness in the rental market which is expected to weigh on investors, especially in inner-city Melbourne apartments which will place further downward pressure on prices.

The report also comments on the importance of continued government support in maintaining growth in the property market. 

“Support from both fiscal and monetary policy makers is likely to remain key, and we expect the high degree of policy support to continue over the next couple of years. 

“We expect rates to remain on hold for at least the next 3 years and think it is likely the RBA will need to expand its QE program beyond the initial 6-month $100 billion goal,” Mr Oster wrote. 

2021: Growth of +3.6 per cent for houses and units

2022: Growth of +5.4 per cent for houses and units

SQM Research

Managing Director, Louis Christopher  

Mr Christopher also forecasts Melbourne property values to be weaker than other capital cities with the base scenario predicting growth of +2 to +6 per cent in 2021. 

This forecast assumes ongoing support from the Federal Government and Reserve Bank of Australia over 2021, as well as a progressive rollout of  Covid-19 vaccine. 

This more subdued growth is partly due to the extended lockdowns experienced in 2020 which has heavily impacted small businesses which is likely to delay employment recovery. 

Mr Christopher also believes that similar to Sydney, ongoing international border closures will also put the state at a disadvantage. 

2021: Growth of +2 to +6 per cent for houses and units

Westpac

Chief Economist, Bill Evans and Senior Economist, Matthew Hassan 

Due to a prolonged period of lockdown, higher exposure to tourism, forgeign education and migration inflows, Westpac economists revised forecast for Melbourne is unchanged with an outlook of -12 per cent decline through mid next year. 

Prices are expected to bottom out by the second half of 2021 and then recover with +12 per cent growth forecasted. 

2021-2023: Growth of +12 per cent for houses and units 

Canberra property price forecast 2021

SQM Research

Managing Director, Louis Christopher  

The SQM Research Housing Boom and Bust report 2021 shows that in the 12 months to 22nd November 2020, Canberra has recorded the highest growth of all the capital cities with house prices up an incredible +6.8 per cent.   

In 2021, Mr Christopher forecasts growth of between +5 and +9 per cent. 

This forecast assumes ongoing support from the Federal Government and Reserve Bank of Australia over 2021, as well as a progressive rollout of  Covid-19 vaccine. 

2021: Growth of +5 to +9 per cent for houses and units 

Brisbane property price forecast 2021

NAB 

Group Chief Economist, Alan Oster 

Healthy gains are expected in the next two years for Brisbane property prices with Chief economist, Alan Oster forecasting over 7 per cent growth for 2021 and 2022. 

NAB has recently revised their outlook to be more optimistic based on the fact that the Australian housing market has held up substantially better than initially anticipated. 

Mr Oster notes that government stimulus has been a major factor in this market rebound. 

“We expect lower interest rates for an extended period will be key support to the housing market over the next couple of years, seeing a boost in prices across the country. 

“While the deterioration in the labour market would normally weigh on prices, the significant government support has mitigated the rise in unemployment and hit to household incomes,” he said. 

2021: Growth of +7.4 per cent for houses and units 

2022: Growth of 7.4 per cent for houses and units 

SQM Research

Managing Director, Louis Christopher  

In 2021, Mr Christopher also forecasts growth for the Brisbane property market with an outlook of +4 to +8 per cent.  

This forecast assumes ongoing support from the Federal Government and Reserve Bank of Australia over 2021, as well as a progressive rollout of  Covid-19 vaccine. 

2021: Growth of +4 to +8 per cent for houses and units 

Westpac

Chief Economist, Bill Evans and Senior Economist, Matthew Hassan 

Westpac economists are extremely optimistic about Brisbane property with prices anticipated to rise +20 per cent over the next two years. 

This forecast for growth is the highest of all the capital cities. 

In the report, Mr Evans and Mr Hassan note that in the next few years, property prices are likely to benefit from the government focusing on improving the unemployment rate as well as the Reserve Bank aiming to lift low wage growth. 

“Aside from ongoing support from policy, housing markets will also be buoyed by a strengthening economic recovery, slowly improving labour markets, the resumption of migration inflows and potential shortages of new stock,” they wrote. 

2021-2023: Growth of +20 per cent for houses and units 

Perth property price forecast 2021

NAB 

Group Chief Economist, Alan Oster 

In 2021, NAB forecasts property prices in Perth to improve from +0.1 per cent in 2020 to +5.0 per cent in 2021 followed by +5.8 per cent in 2022. 

Housing sentiment measured by NAB’s Residential Property Index showed that sentiment in Western Australia climbed steeply in September with the state index lifting 68 points to +60. 

This is its strongest result since the height of the state mining investment boom in early 2013. 

2021: Growth of 5.0 per cent for houses and units 

2022: Growth of 5.8 per cent for houses and units 

SQM Research

Managing Director, Louis Christopher  

Mr Christopher not only forecasts property prices growth in Perth next year, but expects it to be the outperformer with prices to rise +8 to +12 per cent. 

This forecast assumes ongoing support from the Federal Government and Reserve Bank of Australia over 2021, as well as a progressive rollout of the Covid-19 vaccine. 

According to Mr Christopher, this growth is on the back of an ongoing recovery in the base commodities market, further encouraging mining-based project investment. 

Mr Christopher commented on this further in an interview with Tom Panos. 

“Right now, the Perth housing market is starting to take off. Rental vacancy rates are below 1 per cent. Market rents for 2020 rose by 9 per cent for the city of Perth, which is a huge rise for one year. 

“The state of Western Australia is moving forward on the back of big rises in base commodity prices. On top of this, Perth is offering considerably fair value right now. The median house price in pPerth is actually lower than what it was over 10 years ago.

“The rental market tends to lead the housing market either in downturn or upturns and right now as I mentioned, the rental market is running very strong in favour of landlords there,” he said. 

2021: Growth of +8 to +12 per cent for houses and units 

REIWA

REIWA President Damian Collins 

The Real Estate Institute of Western Australia (REIWA) also anticipates strong property market conditions next year. 

REIWA President, Damien Collins says that the current market is back to the strong conditions last seen in 2013. 

“Sales activity in Perth at the start of the year was sitting at approximately 2,900 transactions per month followed by an uptick where we are now seeing nearly 4,200 transactions,” he said. 

While Perth median house prices were the lowest of all Australian capital cities in 2020, Mr Collins said this could change in 2021. 

“While house prices are largely stable over the last 12 months, it is expected that prices will increase between 6 and 10 per cent over the next 12 months,” he said. 

2021: Growth of +6 to +10 per cent for houses and units 

Westpac

Chief Economist, Bill Evans and Senior Economist, Matthew Hassan 

Westpac Economists, Bill Evans and Matthew Hassan also forecast significant growth for Perth. 

In the Housing Bulletin published in September, the latest forecast predicts prices to rise +18 per cent over two years. 

2021-2023: Growth of +18 per cent for houses and units 

Darwin property price forecast 2021

SQM Research

Managing Director, Louis Christopher  

Mr Christopher forecasts an optimistic outlook for Darwin property prices in 2021 with growth of +4 to +8 per cent. 

This forecast assumes ongoing support from the Federal Government and Reserve Bank of Australia over 2021, as well as a progressive rollout of  Covid-19 vaccine. 

In an interview with Tom Panos, Mr Christopher says that Darwin property performance has been unexpected and most likely due to increased interstate migration. 

“Darwin is also a market that has really turned around, which I gotta say we’ve been scratching our heads on because before coronavirus the Darwin economy was very soft, there was not much short-to-mid-term prospects for the local economy there. 

“And then all of a sudden around April we noticed rental vacancy rates in Darwin started plummeting and the word on the ground we heard was that there were a lot of Victorians moving to the Northern Territory all of a sudden. 

“I think one of the things that is going to come up is that there has been a bit of a mass interstate exodus of Victorians trying to get away from the state due to all the lockdowns and Darwin has been one of the places they’ve been able to go to because Darwin was the first territory to open up its borders,” he said.  

Adelaide property price forecast 2021

NAB 

Group Chief Economist, Alan Oster 

According to the latest NAB Residential Property Survey published in November, Chief economist Alan Oster forecasts strong growth for Adelaide in the next two years. 

Growth in Adelaide property is expected to rise over 7 per cent in 2021 and in 2022. This is one of the highest forecasted growth trajectories in the country. 

2021: Growth of 7.4 per cent for houses and units 

2022: Growth of 7.4 per cent for houses and units 

SQM Research

Managing Director, Louis Christopher  

Mr Christopher also anticipates Adelaide to be one of the top performers in 2021.

The Housing Boom and Bust Report 2021 shows Adelaide to grow +6 to +10 per cent next year. 

This forecast assumes ongoing support from the Federal Government and Reserve Bank of Australia over 2021, as well as a progressive rollout of  Covid-19 vaccine. 

2021: Growth of +6 to +10 per cent for houses and units

Westpac

Chief Economist, Bill Evans and Senior Economist, Matthew Hassan 

Economists Bill Evans and Matthew Hassan forecast property prices in Adelaide to rise +10 per cent in the next two years. 

The economists note that the recovery will be supported by sustained low interest rates, ongoing support from regulators, sustained fiscal support from the government as well as a strengthened economic recovery. 

2021-2023: Growth of +10 per cent for houses and units 

Hobart property price forecast 2021

NAB 

Group Chief Economist, Alan Oster 

Mr Oster is optimistic for property prices in Hobart with a forecast of +7.4 per cent over 2021 and again in 2022. Along with Brisbane and Adelaide, this is the highest forecast of all the capital cities. 

2021: Growth of +7.4 per cent for houses and units  

2022: Growth of +7.4 per cent for houses and units  

SQM Research

Managing Director, Louis Christopher  

The SQM Research Housing Boom and Bust report 2021 shows that in the 12 months to 22nd November 2020, Hobart has recorded impressive growth, the second highest of all the capital cities up +6.4 per cent.  

In 2021, Mr Christopher forecasts more subdued growth compared to other states between +3 and +7 per cent. 

This forecast assumes ongoing support from the Federal Government and Reserve Bank of Australia over 2021, as well as a progressive rollout of Covid-19 vaccines. 

2021: Growth of +3 to +7 per cent for houses and units

 
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