2021: A sweet spot

Interest rates are super low.  Foreign travel has been ruled out for now, making upgrading or buying a new home more attractive. Aussies are emerging from lockdown and more restrictions are being eased. Higher home prices are boosting purchasing power for other assets. Taxes have been cut. And the government continues to operate wage subsidy schemes and housing incentives.

And as our summary of NAB’s third quarter housing constraints survey shows there appears to be little getting in the way of 2021 being a housing market sweet spot.

Constraints on new housing developments:

  1. Labour availability, improved over last 12 months
  2. Construction costs, little change over the last 12 months
  3. Housing affordability, deteriorated over last 12 months
  4. Sustainability of recent house price gains, deteriorating
  5. Lack of development sites, little change
  6. Tight credit, improving
  7. Interest rates, improving

Constraints on established housing:

  1. Returns on other investment, improving
  2. Employment security, deteriorating slightly
  3. Level of prices, limited change
  4. Lack of stock, deteriorating
  5. Access to credit, improving
  6. Interest rates, improving

Prices are expected to rise during 2021, and maybe more than the talking heads are suggesting.

I have no idea really by how much prices could rise.

I don’t like predictions.  Many want me to put a number on a future outcome. I resist doing such as it really is guesstimating at best. BS more likely. And the last 12 months provides more evidence that such punts aren’t worth much.

I rather limit my endeavours to foresight. I know that sounds quite up myself, but I am into trying to understand the shape of things rather than presuming their exact structure or mould. I think that is more accurate and useful. To understand is better than blind acceptance.

And 2021 looks like it is shaping up to be a sweet spot for residential property. But just as circumstances align well for 2021, the medium-term conditions don’t look as rosy. Economic reality will take hold soon.

Enjoy it whilst it lasts.

PS Now here is a punt, if lockdown was 2020’s idiom of the year, then sweet spot could take the title in 2021.

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