It’s been a very good year for the property industry. Like all industries we have had our winners and our losers; thankfully this year there were plenty of winners. Despite the doomsayers of 2020 who were predicting waves of insolvencies and mortgage defaults, the market has run hot and successfully so. Most exciting for Wefund is the unstoppable run of the non-bank sector. Our industry has benefited from a sensible regulatory framework that has allowed private capital to chase solid, risk adjusted returns. Every month, we have seen lending rates come down and more competitive funding options enter the market.
On the Eastern Seaboard, Queensland has been the big winner – avoiding most of the lockdowns that punished NSW and Victoria’s hospitality, office and discretionary retail sectors. Queensland is one of the most appealing places on Earth and it’s no surprise that in these times of domestic confinement we are experiencing another boom in the Queensland apartment market. Demand is insatiable and pre-sales are making a serious comeback. Similarly, demand for short-stay accommodation is red hot, an experience that anyone who has tried to book a Xmas trip to Noosa will know.
Luxury residential property across the country has moved from strength to strength and coastal, regional and getaway markets have gone gangbusters. Across Australia, residential homes have appreciated while metro apartments have stagnated. Owners of residential property are counting their paper wealth and have been the beneficiaries of low rates to refinance and access equity in their homes.
Commercial landlords are another winner. Industrial property continues its unabated rise as yields continue to fall and space demand runs rampant. Convenience retail has followed a similar trajectory. In fact, almost all commercial assets have seen transaction yields fall and prices rise except for the more dated office buildings and CBD hotels.
And benefitting from all the above are the agents, the brokers, the banks, the property managers, developers, conveyancers, planners, recruiters, architects, investors, and everyone in between. Agencies, home loan brokers and banks are doing record business and the entire country is a net beneficiary.
The real losers here are those wanting to buy homes who just missed out as prices ran too fast and too quick. To cater to this demographic is the nascent build to rent sector: expect a lot more BTR projects with attractive offerings targeted to young couples and families locked out of the property market.
Things have been mixed for the construction industry. It has been a stressful time for contractors, with record demand for work but massive material and labour constraints complicating their ability to meet demand and price jobs accurately. As happens every year, there have been a few big insolvencies – at the start of 2021 it was Grocon, and recently ABD Group and Privium Group have gone the same way. Immigration restrictions and record demand across both property and mining construction have meant labour is in short supply. If inflation proves sticky and supply and labour chains don’t improve, we will see more ABD Groups and likely some developers fall over too.
Mortgage rates for homeowners and investors bottomed in the middle of the year and are starting to trend up. This is a trend that will continue into 2022; it has and will continue to take some heat out of the residential market. Listings are up and clearance rates are trending lower – we are going into 2022 with a softening of the residential market and a slower growth rate. However, well located, established homes will be resilient and trend upwards – as they provide certainty to buyers amid construction cost blowouts and delays.
2021 was a good year; our economy has held up extremely well, unemployment is at 4.6% and the sun is shining. Yes, we have problems – but in December 2021 it is hard to look at major capital cities around the world and think to oneself “that’s where I’d rather live”. Australia remains a resilient and attractive country; our rule of law, superb vaccination rates, and strong healthcare system and economic opportunities make it a beacon for foreign capital and professionals. If our governments (state and federal) can implement policies that enable skilled migration and free cross-border travel we will be able to tackle labour and skills shortages and strengthen business confidence.
Looking beyond Omicron, the future is bright and 2022 will be another good year for the property industry we all love. Merry Christmas and happy new year.
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