While 2020 was undoubtedly synonymous with uncertainty for the Australian real estate sector, it was also a time of plenty, according to Urban Development Institute of Australia’s (UDIA) State of the Land 2021 report.
This was especially so for the industry’s greenfields sector which, thanks to government stimulus and changing consumer trends, enjoyed significant boosts in sales and land releases across all capital cities.
According to the report, the Perth greenfield market came back to life in 2020, with a 56 per cent lift in lot production to a total of 10,870 lots – 27 per cent higher than the decade average.
The boost to production came in response to a significant hike in demand, with Perth recording the strongest rebound sales performance across 2020 of all capital cities, up 128 per cent from 2019.
UDIA WA CEO Tanya Steinbeck said the lot sales performance was a result of the State Government’s Building Bonus and the federal HomeBuilder grants, coupled with record low interest rates and Western Australia’s strong management of COVID-19.
“WA has experienced strong economic growth and relative job stability compared to other states, providing consumers with confidence in the property market,” she said.
Despite this increased confidence, the median price for greenfield lots fell one per cent from 2019 to 2020, while the average lot size stayed at 375sqm – the second smallest in the country, behind Greater Sydney.
With the minor drop in median price reflecting a continued price stability for Perth’s new lots, Ms Steinbeck said she expected this trend would continue in 2021.
“Given the unprecedented demand for property in 2020, and the positive indicators for continued steady demand over the next year, we expect prices to remain relatively stable or lift moderately this year,” she said. “With the Building Bonus and HomeBuilder schemes introduced in early 2020, there is no doubt greenfield housing completions in particular will remain much higher throughout 2021 and likely beyond as construction on new homes eligible for those grants continues.”
While it was positive news for land, the multi-unit apartment sector had a mixed 2020.
Settled sales for new apartments and townhouses in 2020 were down six per cent in 2019 across the country, and 50 per cent below the decade average, while Perth’s new multi-unit sector enjoyed a 13 per cent bump in transactions, though these figures were still eight per cent below the decade average.
Despite the moderate increase in sales, CoreLogic data in the UDIA report revealed the forward supply of apartments in Perth may be under threat.
The city saw a 17 per cent drop in the active supply of units in 2020 compared to 2019, something Ms Steinbeck attributed to slow market conditions over the last five years, along with a lack of investors to the Perth market.
“Property investor finance has fallen 75 per cent over the past five years from an average monthly loan commitment of $889 million in 2014/15, to just $218 million in the 2019/20 financial year,” she said.
“Investors are a significant portion of the market for multi-unit housing and are more likely to add those properties to the rental market. The lack of investors in WA over the last few years has had a significant flow-on effect to the rental market, which is experiencing record low vacancy rates.”
While subdued activity in the apartment sector was tipped to continue over 2021, Ms Steinbeck predicted a strong future for new housing more generally.
“With the economy remaining strong, interest rates continuing at a record low and employment relatively stable, all these factors, along with a tight rental market, point toward continued demand for new housing in the coming years,” she said.
“If the population starts to grow at a rapid pace once borders reopen next year, we are likely to see demand for housing boosted even further.”