One by one, between March and April, every Australian bank, various economists, and a number of other real estate jibberers published their predictions for the impact that the world’s biggest health pandemic would have on Australian property markets.
On 9 March 2020, Propertyology was one the first property market professionals to publish our initial thoughts about COVID-19: The Property Wolf Who Cried ‘Coronavirus’.
At that time, other than knowing we had to greet people with an elbow tap instead of shaking hands and hearing our Prime Minister say ‘…life as we know it will look a bit different for a few months, maybe six…’, like everyone else, we had no way of knowing what the word ‘different’ actually meant.
In a nutshell, we predicted that the ‘pause button’ would be pressed on property prices for a few months while the [then unknown] restrictions took place.
By the end of April, it felt like every second news story was focused on the biggest property market downturn in the history mankind. The commentary centred around a freeze on population growth, alarming unemployment rates, that good-for-nothing term ‘fiscal cliff’, empty dwellings everywhere and moratoriums on tenant evictions.
Australian Property Market Forecasts
|Late 2019||COVID Arrival||Revised forecast|
|AMP||Increase 10% [Feb 2020]||Decline 5% – 20%||Decline 15% [13 Aug]|
|ANZ||Increase 6% [Oct]||Decline 13%||Increase 9% [16 Nov]|
|CBA||Increase 6.1% [Nov]||Decline 20% [April]||Decline 10% [12 August]
Increase 5% [18 Nov]
|HSBC||Increase 5% – 9% [Nov]||Decline 17% [May]||Decline 2% – 12% [7 Aug]|
|NAB||Increase 4.5% [Oct]||Decline 30% [April]||Increase 5% [20 Nov]|
|Westpac||Increase 5% [Nov]||Decline 10% [April]||Decline 5% [22 Sept]|
|DF Analytics||Decline 15% – 25%
|UBS Bank||Decline 10% [April]|
|Morgan Stanley||Decline 15% [May]|
|Propertyology||Boom||Short pause, then boom||Boom|
While we have grown to accept that our opinions about property markets often do not run adjacent to whatever the consensus is saying, the extent of our contrarianism has never been anywhere near as extreme as this.
We are not aware of anyone else who, back in March-April, predicted that Australian property markets would not only survive the pandemic, but that markets would be booming very soon.
During a time with arguably the greatest amount of uncertainty that people had ever experienced, when all that crazy stuff started Propertyology made a conscious effort to ramp up communications. Our clients are always our first priority, so the frequently updated content in our ‘Members Only’ website ensures they have their finger on the pulse at all times.
Throughout the entire 2020 calendar year, Propertyology has maintained our forecast for property markets to boom. Here’s a summary of what we said and why:
31 December 2019 in our annual Property Market Outlook Report: “Generally speaking, the outlook for Australian real estate is as clear now as it has been for many years. Propertyology forecasts growth in median dwelling prices over the next five years to be superior to the last five years and more widespread, as opposed to a select few locations.”
9 March 2020 as national COVID-19 restrictions were being announced: “Propertyology sees no reason for adjustment to property market forecasts. The fundamentals have not greatly changed. This period of temporary inconvenience creates a small window in time for savvy investors to beat the seagulls to the chip.”
16 March 2020: “The volume of new rental supply has been insufficient to keep pace with new demand, due in part to a series of credit tightening policies enforced by APRA between 2015 and 2019, progressively squeezing property investors out of the market. Creature-of-habit property investors from big cities would be wise to remove the blinkers and take a proper look at all of Australia.”
8 April 2020 during the national COVID lockdown: “I fully expect these coming months will smash all-time record low transaction volumes. But fewer buyers will be neutralised by fewer sellers… real estate prices are largely on hold while everyone is (temporarily) confined to cocoons… the attention of all levels of government will turn to policies to crank the economy back up and the real estate sector will be right at the top of priorities… ten years from now, investors who took advantage will be laughing all the way to the bank while saying ‘screw you Coronavirus’.”
5 May 2020: “Sydney and Melbourne are the most vulnerable property markets… Large parts of Australia, while it won’t feel like it in the emotion of the moment, still have an exciting property market outlook. Price growth is likely to occur quickly and strongly.”
27 May 2020: “Propertyology expects lower profile property markets to continue to be Australia’s strongest performers for years to come.”
4 June 2020: “There were forty-eight (48) individual regional towns that [over the financial year ending June 2019] had an internal migration population growth rate which was greater than Brisbane’s 0.63 percent. And 5 out of 8 capital cities had a net population decline [from internal migration]…”
23 July 2020 while everyone was focused on soaring vacancy rates in Sydney and Melbourne: “Right now, 75 percent of the country currently have an under-supply, nine locations have a balanced market, and the remaining four are over-supplied.” Rising rents and no dwellings available will dominate the headlines in 2021.
13 August 2020: “Contrary to current emotions, many of today’s property market fundamentals are better than 3-years ago [when Sydney, Melbourne and Hobart where booming]. Right here, right now, asset values and rents are rising in various parts of Australia.”
7 September 2020: “This is a new era. One in which society will prioritise life’s most simple pleasures and people will be prepared to make major life changes to realise those simple pleasures, including relocating… The traditional fried egg town planning model will become scrambled as people disburse in a different pattern.”
11 September 2020 in response to Melbourne’s Stage 4 lockdown: “The hotel quarantine situation and subsequent decision to enforce a 112-day city lockdown will cripple Melbourne’s economy for several years. Propertyology will not be surprised if internal migration over the next couple of years reflects a net loss of 30,000 people. It will accelerate a transference of housing demand across Australia.”
30 September 2020: “Anecdotal evidence from research conducted by Propertyology suggests that property markets are already booming in numerous parts of Australia. Frankly, I don’t care what all those economists and banks say, I am doubling down and calling a Summer-time Boom.”
Instead of using skill to methodically analyse the probable impact of a health pandemic on each of the numerous factors which (collectively) influence property market fundamentals, a cast of thousands jumped to poorly informed conclusions. Quite frankly, they all shit the bed!
Once again, they over emphasised the influence of population growth on property prices. They paid no attention to the fact that large parts of Australia were significantly under-supplied and that a germ floating through the air does not produce dwellings. These so-called ‘experts’ consistently make the mistake of assuming that bricks-and-mortar behaves in a similar manner to trade-able commodities like shares. They underestimate the fact that property is shelter and that homeowners will hold on to it tighter than the shirt on their back.
They gave little thought to the fact that, even if unemployment rates do reach 10 percent, that it matters more whether there are enough buyers among the 90 percent who are employed. And, while it clearly comes natural for them to think of all the bad stuff that could happen, they completely fail to recognise the enormous power of human spirit.
Positive people don’t cop a whack on the chin without giving a strong response! The stimulatory response by all levels of government and the RBA was always going to happen. Seriously, what else would one expect them to do?
The single biggest period of doom-and-gloom forecasting in our lifetimes merely reaffirmed something which we’ve said umpteen times over the years: very few people understand the true meaning of housing demand.
One only needs to compare the many doomsday forecasts to the actual results. According to Core Logic data, 5 out of 8 capital cities had a higher median house price at the end of November than the end of February, directly before COVID-19 restrictions commenced. In fact, Melbourne was the only city with a decline bigger than 2 percent over the period. What Armageddon?
Moreover, before the end of September, property markets were (literally) booming in more than a dozen individual cities / towns across Australia. And, in the months leading up to Christmas, every capital city and every regional location had upward pressure on real estate prices. The momentum taken into 2021 is spectacular!
Stay tuned for Propertyology’s 2021 Property Market Outlook Report. Released during the Christmas / New Year period, it is available only to our e-Research Subscribers [sign up here].
Propertyology are national buyer’s agents and Australia’s premier property market analyst. Every capital city and every non-capital city, Propertyology analyse fundamentals in every market, every day. We use this valuable research to help everyday Aussies to invest in strategically-chosen locations (literally) all over Australia. Like to know more? Contact us here.
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