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Pandemic property boom: will it get too hot to handle?

Pandemic property boom

Here we go again – interest rates are at an all-time low and housing markets are running hot.

Property tropes missing from the city’s narrative for years are back in the news. Dumps are selling for squillions; big crowds are showing up at auctions; reserves are being smashed.

House prices in Australia jumped by 2.1 per cent in February, the biggest month-on-month gain in almost 18 years according to CoreLogic’s national home value index.

A year ago, as the coronavirus pandemic took hold, a swag of experts predicted a house price rout. But the unprecedented government stimulus unleashed to nurse the economy through the pandemic crisis has been very favourable for residential property.

The boom has been led by smaller cities and regions, which attracted many new buyers during the pandemic. CoreLogic’s figures show during the past year dwelling values have risen by 11 per cent in regional NSW and by 8.3 per cent in regional Victoria.

But big cities are catching up. The median price of a standalone house in Sydney rose by an eye-watering $4200 a week during the last three months of 2020 to hit a record $1.21 million, Domain Group figures show. Melbourne wasn’t far behind – its median house price added $3600 a week during the December quarter to reach $936,000, also a record.

The nation’s biggest mortgage lender, Commonwealth Bank, has forecast house prices in Sydney and Melbourne to rise by at least 12 per cent over the next two years.

Home lending – which is a reliable indicator of future property price gains – is at record levels. Australians borrowed $28.75 billion to purchase housing in January, 44 per cent more than a year earlier.

“The heat in the housing market is really intensifying,” says ANZ economist Felicity Emmett.

But the strength of the price rally has stoked worries.

“It’s a bit of a blast off in house prices,” says AMP Capital economist, Shane Oliver. “But obviously it will, at some point, raise questions about housing affordability.”

Back in 2003 – at the tail end of a previous housing boom – then prime minister John Howard dismissed concerns about high property prices, saying: “I don’t get people stopping me in the street and saying, ‘John you’re outrageous, under your government the value of my house has increased’.” He claimed most people feel “more secure and feel better off” when the value of their home has gone up.

But opinion polls show the cost of housing has become a growing source of anxiety, especially in big cities.

When Gladys Berejiklian became NSW Premier in 2017 she famously cited housing affordability as one of her top priorities, saying at the time it was the “biggest concern people have across the state”.

The latest Ipsos Issues Monitor, which asks respondents to select the three most important issues facing the community, showed housing affordability is again worrying voters. Housing was the equal top concern in NSW in the December quarter, alongside health and unemployment. Concern about the cost of housing has also risen in Victoria.

During the past decade the housing market has also been cast as a demographic battleground where first-time buyers are pitted against cashed up investors who benefit from negative gearing and the capital gains discount. Meanwhile, an army of young renters is left wondering if they will ever own a home.

Grattan Institute economist Brendan Coates says the latest price surge continues a 25-year trend dividing housing haves-and-have-nots.

“Home ownership has been falling for all age groups under 65, particularly for younger lower-income households and what’s happening now will only exacerbate that trend,” he says.

“If house prices keep rising relative to incomes it’s going to become harder for young people, especially those on lower incomes, to purchase a home. So for them that great Australian dream will recede even further into the distance.”

While there has been an encouraging lift in borrowing by first time buyers in recent months, Coates does not expect that to have much effect on the overall level of home ownership.

“Some first home buyers have made gains recently but the reality is the bottom 40 per cent of income earners are priced out of most of our major cities,” he says. “I wouldn’t expect to see a big jump in home ownership rates among that lower income cohort which is the group we are more worried about.”

Falling home ownership has major long-term consequences for Australia, especially the distribution of wealth. It will also leave more people vulnerable to homelessness in old age, especially those with low incomes.

The experience of 67-year-old pensioner, Su Day, illustrates this challenge. She was recently made homeless following a dispute over her father’s estate and says high housing costs in Sydney make it “downright impossible” for people like her.

“I am locked out,” Day says. “It’s terrifying.”

A recent Human Rights Commission report found women aged over 55 were the fastest growing cohort of homeless Australians.

Day now lives at Mosman House, a project providing transitional accommodation for older women run by Link Housing. But she says her experience highlights the need for more social and affordable housing which offer permanent alternatives for low income earners.

Motivating forces

The main driver of the post-pandemic property boom has been record low interest rates. During the past 18 months the official cash rate has been cut from 1.25 per cent to just 0.1 per cent and the central bank has made it clear those settings will remain in place for an extended period to underpin the economic recovery.

Coates says “we shouldn’t be surprised” house prices have surged given interest rate reductions of that magnitude.

He points to Reserve Bank modelling published in 2019 which found a sustained reduction in interest rates of 1 percentage point would lift housing prices by 30 per cent over a period of three years.

In addition, pent up demand, government incentives, an improving post-pandemic economy and even a fear of missing out have helped stoke the boom.

Detached house prices have been especially strong, far outstripping unit prices during this upswing. The median house price in Sydney was 66 per cent higher than the median unit price in the December quarter, Domain Group data shows, the biggest difference since it began tracking prices in 1993. Melbourne’s median house price is now 64 per cent higher than the median unit price compares well above the average price gap of 52 per cent over the past decade.

So far, owner-occupier demand has been the main driver of price gains but the latest lending data shows investor interest in housing is now on the rise.

But the strength of the rally poses another question familiar to Australians: will the housing market overheat? Might the unique policy responses to the pandemic inadvertently inflate a dangerous housing bubble?

Reserve Bank Governor, Philip Lowe, told a parliamentary committee last month the recent strength of the house prices has been helpful for the economy as it recovers from recession.

Pandemic property boom

RBA governor Philip Lowe said it would not lift interest rates in a bid to curb property price growth. “The RBA does not – and should not – target housing prices.” CREDIT:BLOOMBERG 

“The past year would have been even more complicated if there had been large and widespread falls in housing prices,” he said.

But authorities are “watching closely.”

Dr Lowe will not lift interest rates in a bid to curb property price growth.

“The RBA does not – and should not – target housing prices,” he said last month.

But financial authorities can take other steps known as “macroprudential” regulations to ensure financial stability.

That might include caps on bank lending or a requirement for bigger deposits from home borrowers.

On Wednesday the Council of Financial Regulators (which co-ordinates the nation’s main financial regulatory agencies) issued a pointed statement saying it put a “high emphasis on lending standards remaining sound, particularly in an environment of rising housing prices and low interest rates”.

The council will also “closely monitor developments and consider possible responses should lending standards deteriorate and financial risks increase”.

ANZ’s Felicity Emmett expects regulators to intervene later this year.

“That’s when we think they will step in to slow things down a little bit,” she says.

But in the meantime it seems Australia’s post-pandemic housing boom has a way to run.


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Chelmer: Why locals won’t leave this riverside Brisbane suburb

Chelmer riverside

It’s a telling sign when families stay put in a certain place over multiple generations, where one’s childhood is made so complete, those who grow up there yearn to pass down this same upbringing to their own family.

This is certainly the case for Chelmer, a scenic suburb encased by the Brisbane River on three sides and known for its grand, quintessential Queenslander homes and laurel tree-lined streets.

According to Alex Jordan of McGrath Paddington, many locals in the area have been living in their homes for more than 40 years.

Often these homes are bought by the younger families who grew up in the area and are drawn back by the fond memories they hold.

“It’s very much a family-focused suburb; it’s the type of place where children still ride their bikes around the neighbourhood and families go for walks to simply admire the charming streets,” says Jordan.

Chelmer riverside

Median house prices in Chelmer have increased by 47.1 per cent year-on-year. Photo: Supplied

“The natural beauty, varied demographic, and desirable lifestyle are the key factors in Chelmer’s desirability, along with the great local schools and its own train station.”

Domain’s latest House Price Report reveals Chelmer’s median house price is $1.765 million, rising 47.1 per cent year-on-year.

In Jordan’s opinion, the suburb’s wonderful sense of community and growing amenities are what keep the buyers strong and unwavering.

“There are many restaurants and cafes to enjoy – such as Botellon Tapas & Wine Bar, Boucher French Bistro, Hunter & Scout Cafe – with most businesses being owned by locals who live in the area,” Jordan explains.

“The number of nice parks, including Graceville Memorial Park and ​​Gordon Thomson Park, leads many local families to become members of a variety of sporting clubs, ranging from cricket to rugby, which of course only adds to the area’s team spirit.”

Originally from country Victoria, Andrew Thomson has lived in Chelmer virtually all of his adult life, moving to the area 20 years ago, where he would buy a house and raise his family.

Having grown deep roots in the area since, Thomson is now the president of the local Australian rules football club – the Sherwood Magpies – a great hub for kids and adults alike, regardless of whether they play football.

“Chelmer’s strong sense of community is an integral part of this area, particularly during the devastation of the 2011 floods and the recent repeat of that on a lesser scale in 2022. When the clubhouse was threatened by rising floodwater, all it took was one quick post on social media and 100 people were there within 30 minutes ready to lend a hand,” recalls Thomson.

“It was amazing, though unsurprising to see, and it goes hand in hand with living in such a connected community and being part of a sporting club that sits at its heart.”

Given Chelmer’s abundance of green space and the clear separation thanks to the winding Brisbane River, Thomson notes how the area is akin to a peaceful peninsula, seemingly a world away from the city, but in reality, just a 10-minute drive from the Brisbane CBD.

“Ideal mornings may include a bike ride on the river loop or a stroll along the riverside, followed by a coffee stop at one of the many fantastic cafes,” says Thomson.

“Spring is particularly delightful, with great weather, the excitement of footy finals, and the smell of freshly cut lawns and suburban barbecues – it doesn’t get any better.”



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Developers to swoop on one of the largest sites in the Woolloongabba Olympic precinct

Developers to swoop on Woolloongabba Olympic precinct

A large development site in the heart of the Woolloongabba Olympic precinct is up for sale, with price expectations in excess of $45 million.

The 1.28-hectare rectangular shaped development site at 73 Ipswich Road in Woolloongabba is expected to attract apartment developers given its central location at the heart of the planned infrastructure in the precinct.

The site has three street frontages, to Ipswich Road and Henry Street and offers multiple development outcomes including residential, commercial, medical and hotel, subject to council approval.

Knight Frank agents Blake Goddard, Christian Sandstrom and Matt Barker in conjunction with Nathan Moore of Ray White Commercial Bayside on behalf of the vendor, a local private.

Goddard said the property was one of the largest privately owned infill sites within a two-kilometre radius of the Brisbane CBD and was expected to be hotly contested by buyers.

“We expect a wide range of developers to be interested in this site, including residential, commercial, mixed-use and build-to-rent developers, due to its flexible zoning allowances,” he said.

“It is one of the largest privately-owned properties situated in the heart of the Woolloongabba Olympic precinct, close to the Cross River Rail and the redevelopment of ‘the Gabba’ stadium, and one of the most significant development opportunities to have hit the market in the last few years.

“Quality development sites are sought after in the current market, but this site will be even more attractive to a wide range of buyers due to the rarity of size and location. The Gabba stadium and surrounding precinct is set to undergo major transformation in the coming years with over $1 billion allocated to the precinct.”

Moore said the property benefitted from its three-street frontage, easy access to major. arterial roads including Ipswich Road and the M1 Pacific Motorway, and the fact that a majority of it was undeveloped.

“The property is set to benefit from its prime location underpinned by exceptional future development opportunities in the area surrounding the 2032 Olympics,” he said.

The site is surrounded by nearby  amenity including The Gabba, the Logan Road dining precinct and the Cross River Rail station upon completion.

“The three-street frontage site enjoys a strategic location within Woolloongabba, offering unrivalled amenity along with extensive surrounding transport infrastructure and development,” he added.


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Residential Landscaping Ideas to Increase Your Brisbane Property Value

Residential Landscaping Ideas to Increase Your Property Value

One of the top trends in home renovations this year is to improve outdoor living – transforming spaces into inviting areas to maximise outdoor living and entertainment activities.  Residential landscaping, which can boost the value of a property in Australia, is one of those important transformations.

If done right, it can even increase the value of your real estate by up to 28%. From planting grass to creating a vegetable garden, there are several landscaping ideas that could make your backyard a delightful green oasis.

Residential Landscaping -Increase Your Brisbane Property Value

Well-Maintained Turf
A well-maintained landscape offers several benefits. It improves the curb appeal of a home and is pleasing to the eye.  In addition, it immediately increases the value of a home. Landscaping involves planting and maintaining grass on your lawn.  A manicured lawn is not only a sight for sore eyes, but it also enhances the overall appearance of a property.

However, before planting anything on your property, it is vital to prepare a coherent design and plan because a landscape that is assembled in piecemeal looks cluttered and unappealing. Hence, if you can afford to hire a professional landscape designer, do so because they can come up with a master plan that will make your yard look organized and beautiful.

It is also possible to do the landscaping yourself if you’re willing to do the extra work and effort. Even with a small budget, you can present a lovely landscape that looks well put together. Once you identify where to put your grass, ensure that it remains verdant and properly maintained.

Regular mowing, watering, weeding, and fertilisation are what it takes to keep your turf lush and green. Having the right type of grass also matters. For example, Buffalo and Couch are some types of grass that grow well in Australian conditions.

Trees and Shrubs
Second to a well-manicured lawn, potential buyers will also look at the maturity of a garden. Thus, plant trees and shrubs in strategic places, but before choosing the vegetation, ensure that you know which locations are sunny and shady in the garden. You can then choose the appropriate plants for those conditions. It’s also a good idea to opt for native plants.

They are easy to grow and are suitable for the challenging Australian climate. In addition, local plants support a healthy environment because you won’t need fertilisers and pesticides to keep them healthy, not to mention preserving biodiversity through a native garden.

Trees also make your home look fabulous in addition to providing shade, offering privacy, attracting bees, and creating shelter for birds. Consider planting a crepe myrtle, a hardy tree that gives stunning summer flowers and bright autumn foliage. It can be grown in the ground or pot.

Other species that will give a gorgeous vibe to your garden include the ornamental prunus, evergreen magnolias, frangipani, and blueberry ash. Don’t forget to make flower beds which can be a mixture of annuals and perennials to make your garden pop with colour.

Landscaping your property entails a concerted approach and effort to ensure a harmonious outcome. Maintaining a verdant lawn, planting trees and shrubs, and including flower beds are some ideas to improve the look of your outdoor space.

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