The last quarter of 2020 saw SA housing prices achieve a lift of 3.6%, well ahead of the 2.3% national average and they are sitting at a record high. For the full year, housing values nationally grew 3.0% while SA outpaced that number with 5.9%. What’s going on and did it all start with a pandemic?
We used to say that there were 3 D’s that determined the health or otherwise of the real estate market in South Australia. Death, Dollars and Divorce. We’ve had to rethink that a little because something called a pandemic has added another dimension.
Back in April and May 2020, it is fair to say that we had a nervous real estate market in SA. The transfers registered through Land Services SA were at their lowest in months and just as it seemed like the market was really struggling, June saw an enormous rebound with transfers up 36% on May. So, it seemed things were on the look up once again. The momentum didn’t slow and by December 2020 property transfers were tracking more than 20% above December 2019. In January 2021, transfers were 11% above January 2020.
The price of money hasn’t been cheaper in a long while with rates at very affordable levels. The RBA cash rate is now sitting at 0.10%. This is a 30-year historical low and in 1990, it was 17.5%. Imagine that if you were a first home buyer!
Low rates make it difficult to generate good returns from cash investment, so investors look to property and the equities market to boost their returns. The equities market has been a bit like a bouncing ball over the past twelve months so it’s not surprising that investor eyes are turning to property.
We’ve spoken for many years about the drain on our talent pool in SA and the beneficiaries have been the eastern states of Australia and the usual international suspects of Singapore, London and the US. But with global lock downs, we’re now realising that in many cases, we can work effectively from anywhere – most Australian eastern states workplaces have been in remote working mode for close to a year. And where better to base yourself than SA? The cost of housing and living is among the cheapest in the country. And there’s an emotional reconnection for expatriates. For many the immediate solution to the uncertainty in their adoptive country was to make a return back to Australia and to SA. We’d call it a flight to familiarity.
What else is creating buoyancy in the SA market? With everyone experiencing at least some form of lockdown over the past year, there’s been an evaluation of relationships and lifestyle and it would seem that some relationships didn’t quite go the distance. Relationships Australia reported that 42 per cent of respondents to a survey as early as May 2020 said isolation had negatively impacted their partner relationship. The SMH reported that a national mediation service saw the number of people considering separation were up more than 300 per cent. If there is already strain in a relationship then there is no doubt that being locked in the home together without some reprieve coupled with the financial pressures that some households are experiencing is likely to lead to at least some friction. Seems our Divorce D still holds.
The pandemic and the resultant economic impact saw the release of several new support initiatives from Government that have meant relief or assistance for many. Job-Seeker and Job-Keeper along with the Home Builder Grant and other existing programs have all made buying a home either more attractive or more affordable.
What’s next? It’s difficult to say with any certainty but indications are that rates will stay low for the foreseeable future so for the reasons we’ve mentioned, real estate will remain attractive. Prices were strong in the second half of 2020 and agents are telling us they have more buyers than properties; this all points to a solid 2021. The only caveat (see what we did there?) will be the quantum of the impact from the reduction in support initiatives. We’ll keep you up to date.