Australia's property market started 2021 with a bang
After a year that nobody saw coming, the Australian property market wasted no time finding its footing in 2021. CoreLogic data showed national home values rose 0.9% in January alone, capping off a recovery that surprised most observers. Whether you’re thinking about buying, refinancing, or just trying to work out what your home is worth, our borrowing power calculator is a good place to start while you read through what happened.
Market overview
January’s 0.9% national gain masked a significant split between capital cities and regional areas. Capital cities averaged 0.7% growth for the month, while regional cities romped ahead at 1.6%. Sydney and Melbourne both recorded 0.4% gains, modest but positive given everything the two cities went through in 2020.
On the lending side, the Australian Bureau of Statistics reported that owner-occupied loan applications rose 38.9% over the 12 months to December 2020. That’s an enormous lift, and it reflects how quickly buyer confidence rebounded once lockdowns eased and the government’s stimulus measures kicked in.
One of the more reassuring signals came from the mortgage deferral data. At the peak in May 2020, deferred home loans totalled $192 billion. By the end of December 2020, that figure had dropped to $43 billion. Most households that had paused their repayments were back on track, which removed a significant overhang of risk from the market.
Regional growth
Regional Victoria posted 1.6% growth in January, and Regional NSW wasn’t far behind at 1.5%. These aren’t just strong numbers in isolation, they’re part of a clear trend that took hold through the second half of 2020 and was still gathering pace heading into the new year.
A few things were driving this. First, affordability. In a low interest rate environment, buyers could suddenly afford significantly more, and regional towns offered that extra space and land that city properties couldn’t match at the same price point. Second, remote work had become normalised for a large chunk of the workforce, meaning proximity to a CBD mattered less than it used to. Third, with international borders closed, the usual flow of overseas migrants into Sydney and Melbourne had slowed, while Australians living abroad were eyeing a return home and looking at options outside the major cities.
If you want to understand the city-side context behind this shift, it helps to look at how Sydney and Melbourne’s property market performed through 2020 before the regional surge took hold.
A seller’s market
If you were trying to buy in January 2021, you already knew how tight conditions were. Fresh listings were running 3.3% below where they had been a year earlier, and total advertised stock across the country was 27.8% lower than the same time in 2020. That’s a dramatic reduction in the number of homes available to purchase.
At the same time, the number of homes actually selling surged. National home sales were up 23.9% compared to the same period the prior year. Regional markets recorded an even stronger result at 26.8%, with capital city sales up 22.1%. When you combine sharply lower supply with sharply higher demand, prices move, and they did.
For buyers, this meant acting quickly, doing your homework upfront, and knowing your borrowing capacity before you walked into any inspection. For sellers, it was as good a moment as the market had offered in years.
Houses vs units
The gap between houses and units was one of the defining features of this period. Over the six months to January 2021, house values rose 3.5% nationally. Unit values over the same period were essentially flat. The preference for space, a backyard, and separation from neighbours had translated directly into price performance.
Unit rents told a similar story. Melbourne unit rents were down 7.8% year-on-year, and Sydney unit rents had fallen 5.6%. That said, there was a silver lining for Sydney: unit rents had crept 0.8% above their March 2020 low, suggesting the worst of the slide may have passed. Perth and Darwin were the bright spots on the rental side, recording the strongest gains nationally as their local economies held up better than expected.
For investors weighing up houses versus units in the current cycle, the dynamic shifted considerably as the market moved through 2021 and into the following year. You can read more about how Australia’s property market performed through 2022 to see how those trends evolved.
Recovery drivers
Several factors combined to push the market higher heading into 2021:
Risks ahead
The outlook was positive, but there were genuine risks worth paying attention to:
If you’re trying to work out how changes to lending conditions might affect your repayments, our loan repayment calculator lets you model different rate and loan scenarios so you can plan with confidence.
Common questions
Q: Why did regional areas outperform capital cities in January 2021?
A combination of factors drove the regional surge. Affordability was the starting point, with lower prices offering buyers more value for their money in a low rate environment. Remote work arrangements that became entrenched through 2020 meant many buyers no longer needed to live close to a city office. On top of that, the pause in international migration reduced competition in capital cities while regional areas saw interest from locals looking to upsize or make a lifestyle change.
Q: What happened to mortgage deferrals by the end of 2020?
At the height of the pandemic in May 2020, deferred home loans peaked at around $192 billion. By the end of December 2020, that figure had fallen to $43 billion. The vast majority of borrowers who had taken a repayment pause had returned to making regular payments, which significantly reduced the risk of a wave of forced sales hitting the market.
Q: Was January 2021 a good time to buy property in Australia?
It depended heavily on your situation. The market was moving quickly, stock was tight, and competition was strong, which made it challenging for buyers. That said, interest rates were at historic lows and government support schemes were still active, which helped with affordability. If you had your finances sorted and knew your borrowing capacity, you were in a much better position to act decisively when the right property came up.