I usually do a market watch article every six months or so. However, sometimes the market is unusual that it needs more commentary. This is one of those times. Many readers may wish for this article to tell you what’s going on, and what’s going to happen next? I can only answer “I don’t know” to both questions.
I do know that for me and for all the selling agents I have talked to, we have never seen anything like this. In the past I have witnessed more than a couple of extremely strong market surges – 2002/03 and 2016/17 come to mind. But this current market is double that and on steroids.
Stories from the Front Line
Just before the Xmas break, I was booked to bid at three auctions. They were all cancelled due to each property being sold prior to the auction. The couple of auctions I did attend, I was left holding a paddle limp while watching the bidding fly past the estimated range. I have been on the way to inspections, with clients in the car, only to be called by the listing agent saying the vendors have changed their price now put an extra 50%. I went on a journey with a client where we were bidding on a rural acre in a good location. The expected range was advertised as $1.3- 1.5 mil. We pulled out when the bidding went past $1.9 mil.
It is hard to say how long this market will hold up like this. Some commentators are saying we are at the peak and it is true that a lot of buyers are hesitant now with lots of media on this story.
Byron Bay has taken the crown for the highest house price growth of any suburb in the country last year, with house prices rising by an astonishing 37 per cent. The median house price is now $1.68 million.
The rapid growth has prompted a spillover effect in neighbouring towns, with the median house price in the Byron Shire overall rising 26 per cent in 2020. The median house price in the town of Bangalow rose 24 per cent to a $1.175 million median while Mullumbimby rose 16.6 per cent to $830,000.
Construction Led Recovery
We are at the effect of major economic and demographic shifts. The post-COVID flight from the cities and the ability to work from home are having an impact. Plus, there is a financial ecosystem with government packages and incentives turbocharging the construction industry and property.
A recent internal RBA document, released under FOI pressure, estimated that property will have 30% growth in the next three years. But this is no secret, in the government’s own words: “This is a construction led post-COVID recovery”. The various first homeowner grants and renovation incentives have been over-subscribed and the federal government is expected to spend around $2 billion in this space.
At the lower end of the local market, we are seeing a frenzied level of demand for anything lower below $1.5 mil. Anything below the median is now in the crosshairs of anyone who can pull their resources together to get a piece of the local market before it gets out of reach.
This FOMO is being exacerbated by the numerous distressing stories of rental demand. As was reported in the SMH earlier in the month, Byron’s vacancy rate now sits at a worrying 0.03% as opposed to the still low 3.1% in December 2019. The rental shortfall was exacerbated by the influx of film and TV people here at the end of last year and expect more of that to come.
We are having out of this world prices paid for top-end properties. This is something many of us are now concerned about. Byron Shire is now on the radar of an investor class that is happy to park money in luxury real estate. This could replace the wealthy lifestyle market we have been seeing for the last few years. Lifestyle buyers can easily be absorbed and assimilated and help maintain “the vibe”. This new class of buyer are only passing through and will leave it empty most of the year.
A good example of this activity is evident in the proposed listing of a house in Bay Street Byron. This property, on the market for $60 mil, is also mentioned in Hot Property. The developer, Adam Hammond, has said the property “was likely to attract more international interest, given its scale and price tag. The sort of person who can spend just over $60 million Australian on a house, which realistically will be a holiday house, will likely have a net worth of at least half a billion dollars.”
As you can imagine, the news that we are now going be intermittently visited by some of the 1% who come once a year to check on their money, is not something most people will be rejoicing over. For many long-term locals who have invested time and energy making this place but not had the desire or ability to buy something previous to the price rises are feeling the pressure.
Many would assume this would be a great time to be a buyers agent here with all this going on. It is not a matter of making hay while the sun shines. It is hard to get a deal done and it is not easy advising my clients to be rash and pay well over market value. Like many other agents I know, we are not just in this for the money – normality and just doing a good job for our clients would be the preferable option.
And for the data-driven, the Stats:
- CoreLogic data shows that dwelling values in capital cities rose 2 per cent during 2020. However regional markets rose a remarkable 7%. The last time this happened was in 2004.
- The number of loans for the construction of a new home saw record-breaking levels in November 2020, as the figure, tracked by the ABS, record its sixth consecutive rise.
- New home loan commitments in November jumped a further 7.2 per cent higher than the record-breaking levels in October 2020 to now be 99 per cent higher over the year.
- Stimulus measures and low-interest rates through 2020 resulted in building approvals reaching an eleven-year high in November, according to the Australian Bureau of Statistics (ABS).
- House approvals rose for the fifth consecutive month in November, seasonally adjusted, reaching the highest recorded level since December 1999.
- Approvals for renovation work also peaked, reaching an all-time high in November.
- According to ME Bank Andrew Bartello, topping the property trends in 2021 is the desire for ‘urban village’ living, related to the significant increase of professionals working from home. “With the daily commute no longer a deciding factor in the home buying process, regional areas within a commutable distance to CBDs are being added to homebuyers’ wish lists.
- If you can access Apple News, this article from the AGE is interesting.