Property rises tipped to rise 9pc in 2021: SQM Research

House prices will rise between 5 and 9 per cent next year if COVID-19 is kept under control, new analysis predicts.

SQM Research has forecast house prices could rise between 5 per cent and 9 per cent through 2021. Picture: Jenny Evans

Residential property prices could rise as much as 9 per cent during 2021 if COVID-19 remains contained in Australia, according to the latest house price modelling from data firm SQM Research

The combination of strong federal and state government stimulus and low interest rates already helped to push prices into positive territory in all capital cities in November.

SQM managing director Louis Christopher, said the addition of the upcoming changes to responsible lending laws and improving consumer confidence would cause dwelling prices to rise a further 5 per cent to 9 per cent over the course of next year,

Perth is tipped to be the best performing capital city, followed closely by Sydney and Adelaide.

The base case outlined in the Housing Boom and Bust Report 2021 authored by Mr Christopher, assumes the record low interest rates of 0.1 per cent will remain unchanged by the Reserve Bank over the next 12 months. It also assumes COVID-19 is contained by the progressive roll out of a vaccine and that JobKeeper will be extended past March.

Employment support would be essential for the ongoing momentum of the housing recovery, but market’s fundamentals were well positioned for growth, Mr Christopher said.

“It is likely that the housing market will gain further momentum on the back of increased investor activity, especially from those who seek some sort of income yield,” he said.

The ongoing recovery in the base commodities market and encouraging mining-based project investment had positioned Perth for a forecast rise of between 8 per cent and 12 per cent next year, the largest of any capital, SQM reported. Sydney was predicted to follow with an increase of 7 per cent to 11 per cent, propped up by stimulus from the proposed opt-in changes stamp duty and land tax for home buyers in NSW.

Melbourne is expected to rise at a more subdued rate of 2 per cent to 6 cent, due in part to the extended lockdowns in 2020 which affected many small businesses and so likely delayed a jobs recovery.

SQM also modelled on a scenario which would see JobKeeper eliminated, quantitative easing taken off the table and additional virus cases leading to lockdown. Even in this instance, prices would remain stable or rise by up to 4 per cent nationally, with only Melbourne and Hobart facing falls.

Mr Christopher said the pandemic rocked many investors‘ belief that property was inherently safe. He said the assumption that prices won’t fall puts pressure on those hoping to enter the market.

“However, we have some misgivings on the longer-term consequences of these new stimulatory policies. If housing is regarded as an asset class that is not allowed to fall, Australia could have some rather serious social issues surrounding home ownership rates over the long term.

“Many in the community are starting to think they cannot ever lose on housing. That the Government will always be there to step into the housing market, if need be. And that is a scary idea …”