One of Australia’s most respected property analysts has forecast strong price growth for the Sydney property market in 2021.

Louis Christopher, in his famous annual forecasts predicted that Sydney’s median property price would increase by 7% to 11% in 2021 under the ‘base case’ scenario. His assumptions are:

• The Reserve Bank of Australia (RBA) will leave the cash rate at 0.10%

• The RBA will expand its ‘quantitative easing’ program

• Governments will contain a third wave of Covid-19 via more lockdowns

• JobKeeper will be extended to September (it’s currently forecast to end in March)

• There will be a progressive rollout of a Covid-19 vaccine

Christopher has also forecast price growth in Australia’s other capital cities.

“As 2020 draws to a close, the national housing market has responded to the unprecedented economic stimulus packages as well as record-low lending rates,” he said.

“Auction clearance rates have lifted since mid-year and various dwelling price measurements have started to record price rises. 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.”

Interest rates unlikely to rise "for at least three years"

As Christopher said, interest rates have never been this low.

If you’re an owner-occupier, you can get a loan that starts with a ‘1’. Remarkably, three of the big four banks are offering four-year fixed rates for either 1.98% of 1.99%.

Home loan rates seem likely to stay at ultra-low levels for the foreseeable future. In a recent speech, Reserve Bank governor Philip Lowe said the RBA board did not expect to increase official interest rates "for at least three years".

Naturally, when interest rates are so low, they tempt people into the market. That partly explains why, in October 2020, the most recent month for which there is data, the value of new mortgage applications reached a record high.

With so many people in the market, there will be hot competition for Sydney properties in 2021, which will push up prices.

Government reforms will also stimulate buyer demand

Two big reforms, which are due to be introduced in 2021, are also likely to increase buyer demand.

First, under the NSW government’s stamp duty reforms, buyers will have the chance to either pay stamp duty upfront (a large, one-off fee) or an ongoing property tax (a small annual fee).

A lot of borrowers will choose to pay the property tax, which means they’ll need less savings to buy a home. So we can expect more buyers to enter the market.

Second, the federal government introduced new legislation, on December 9, to remove the ‘responsible lending obligations’. (This reform will take effect on 1 March 2021, if it’s approved by parliament.)

At the moment, it’s up to lenders to make sure that borrowers can repay loans. That forces lenders to examine mortgage applications in forensic detail, which not only slows down the process, but also leads to fewer borrowers being approved, and for smaller amounts.

Under the government’s reforms, responsibility will shift from the lender to the borrower. That should give lenders more confidence to approve loans, which will speed up the process, lead to more borrowers being approved, and for larger amounts.

Again, that will lead to more buyers entering the market.

The sooner you buy, the less you’ll pay

Thinking about buying in 2021?

If so, it might be best to take action sooner rather than later, because if the market runs as hot as everyone expects, the earlier you buy, the less you’ll pay.

A good first step is to speak to a Sydney Mortgage Broker, to assess your options. Eventus Financial is one of the best brokers in Sydney. Our Director Alex Veljancevski was named Best Residential Broker for NSW in 2020. Schedule a no-obligation consultation with Alex to find out how we can help you with your home loan.