Australian property market remains resilient, but will it last?

author-avatar By on July 30, 2020
Australian property market remains resilient, but will it last?

Photo by Austin Kehmeier on Unsplash

A new report has revealed the Australian property market is balancing on a tightrope.

The PRD Australian Economic and Property Report found the market has managed to hold its value, despite predictions prices could fall by up to 30% due to COVID-19 shutdowns.

After devastating drought and bushfires, the property market was still managing to recover in the latter part of 2019 and first two months of 2020. 

Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner occupiers.

Lender
Advertised rate Comparison rate Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval
VariableMore details
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
VariableMore details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
VariableMore details
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • Refinance only. Fast online application
  • No Nano fees. Free 100% offset sub account
  • Mobile app, Visa debit card & instant payments
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • Refinance only. Fast online application
  • No Nano fees. Free 100% offset sub account
  • Mobile app, Visa debit card & instant payments
VariableMore details
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
VariableMore details
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^

Rates correct as of October 17, 2021. View disclaimer.

The report found on average, median house prices grew for capital, metropolitan, and regional markets in the 12 months to the first half of 2020.

Regional markets performed best, up by 3.4%, while capital cities grew by 1.0% on average, led by Sydney, Melbourne and Hobart. 

PRD Real Estate Chief Economist, Dr Diaswati Mardiasmo, said she believes the market has shown great resilience despite everything that was thrown at it in the past 12 months.

“Whilst COVID-19 hit us swiftly this year and threw Australian economy and property markets into turmoil, things settled down within the property market quicker than initially thought," she said. 

Dr Mardiasmo added this didn't mean a return to normality, with Government stimulus propping up the property market and offsetting the fallout from the pandemic. 

Since the Reserve Bank made a total of 125 basis point cuts to the cash rate since June 2019, upgraders and first home buyers have been taking advantage of historically-low interest rates on home loans. 

The report found upgraders accounted for 42.0% of loans in June 2020, and first home buyers accounted for 21.0% of loans in the same period, the highest level since 2013. 

New home sales increased by 77.6% as of June 2020, from a record low result in May, and the HomeBuilder scheme looks to be balancing the downturn in residential construction. 

Dr Mardiasmo said there was no doubt we were seeing signs of gradual improvement, but uncertainty about health and the economy meant many households and businesses were still cautious.

“The key going forward will be increasing levels of employment, public and private investment and consumer confidence based on the ongoing impact of COVID-19," Dr Mardiasmo said. 

"This sets the scene as we walk the tightrope to full economic recovery."

First home buyers out in force in New South Wales

The report found first home buyer activity remained strong in the 12 months to the March quarter of 2020, increasing by 33.3%.

This increase was labelled surprising as home loan affordability declined by 10.3% in the same time, but this was offset by various Federal and State Government stimulus. 

New South Wales metropolitan area settled sales grew by 24.6% in the 12 months to May, the strongest of all metro markets nationally.

The same area had the strongest median house price growth in New South Wales, up by 12.2%.

In good news for renters, Sydney recorded the greatest softening in median two-bedroom unit rental price, by -3.6% in the 12 months to the March quarter of 2020.

Victoria more affordable than New South Wales 

The report found Victoria's home loan affordability declined by only 7.6% in the 12 months to the March quarter of 2020, compared to New South Wales decline of 10.3%. 

The report said this made it an ideal place for first home buyers and activity in the group was strong, increasing by 24.4% and having the most loans for the group approved nationally (8,624). 

Victoria was also one of the most resilient markets in residential construction, softening by only 4.3% over the same period. 

Melbourne recorded steady growth in its median two-bedroom unit rental price, up by 2.2% in the 12 months to the March quarter of 2020.


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

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Alex joined Savings.com.au as a finance journalist in 2019. He enjoys covering in-depth economical releases and breaking down how they might affect the everyday punter. He is passionate about providing Australians with the information and tools needed to make them financially stable for their futures.

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