This time last year, I wrote an article predicting that the 2020s decade will be our centuries Roaring ’20s.
I made that bold prediction not through guesswork or arrogance, but by researching past pandemics such as the 1918 Spanish flu. I am not a conspiracy theorist nor an economist. I just like to put things into a real-world perspective and make informed decisions based on those facts. History has a funny way of repeating itself, and when you investigate past world crises, there always seems to be a strong recovery post such events.
How are we travelling?
According to CoreLogic, in the 2020–21 financial year, dwelling values rose by a staggering 13.5 per cent. That is the highest annual growth rate since April 2004. We have also had one of the highest volume of sales transactions at 582,913 which has not been recorded since February 2004. With 10.6 million dwellings in Australia, that represents a turnover rate of 5.5 per cent. To put that in perspective, approximately one in every 18 homes sold during the year. While the sentiment in the marketplace and predominantly from sellers is that the “perceived shortage of listings” limits their opportunity to find a new home, the numbers tell a different story.
The gains for sales agents has been three-fold. Firstly, our average commission per sale has increased due to the increase of property values. Secondly, the number of available properties to sell has increased, and therefore sales per agent have increased. Thirdly, and most likely more importantly, the number of selling agents in the field over the last 12 months has decreased. What does that mean for every sales agent? Right now, there is a much bigger pie available for fewer real estate agents.
So, what of the future?
As real estate agents, I do not believe anyone has a better front-row indicator of what is happening in the economy in real time and ahead of time. We are in the lounge rooms of everyday Australians, networking with a mix of small businesses and entrenched in our local community. We get to see exactly what is happening in the economy; the confidence the everyday consumer has, and the love affair Australians continue to have with property.
Over the course of the pandemic, businesses and households have become very adaptive with working with restrictions. More familiarity with working from home, shopping online and other stay-at-home fixes means that we have changed the way we look at how we can work. Employers are more receptive and accepting of employees wishing to work from home and there is every likelihood this will continue and grow post the pandemic.
What you think matters
Another piece of good news is that experience with previous lockdowns suggests that some activity tends to bounce back quite sharply once restrictions are lifted: that is, activity is postponed rather than destroyed. This is absolutely true for our industry. One month’s loss in sales is easily recoverable the following month. It is just a postponement.
Other factors to consider moving into the future
Long-term interest rates remain low and for an extended period. Despite discussion of “affordability” often surrounding strong price increases, banks have very tight lending criteria, and while it is more difficult and it’s taking longer to receive loan approvals, this provides me confidence that the growth is a measured response to demand.
Unemployment is lower than predicted. This one for me is the big one because, regardless of interest rates being high or low, if you do not have a job, you cannot get a loan. Interestingly, my recent discussions with employers and business owners in many sectors have said that demand for employees is very strong. Everyone I am speaking to is wanting and or struggling to find good talent. Again, this leads me to believe we are well placed with our employment position.
Let’s talk about the pandemic and current outbreaks and restrictions. I get the sense that, for Australia, we have an effective strategy to contain the virus and the Commonwealth and state governments continue to roll out policies of financial support to those who most need it. This raises confidence and further strengthens a positive economic outlook. Noting that, I do wish to raise and acknowledge that many in our country have been extremely adversely affected by the pandemic and economic hardship, loss of businesses and employment (let alone the strain on health and wellbeing) and continue to do it hard. We can only hope that the bounce-back reflects positively to those worse affected.
Finally, population growth. Australia is a growing country and while immigration has all but ceased, this situation is only temporary. Once our borders are open and it is safe to do so, we will revert to allowing immigrants to enter the country, further adding pressure to the property market and adding to demand. It is predicted that we will be at a population of over 35 million by mid-century.
For those of us that are lucky enough to call real estate our profession, I continue to believe there has never been a more perfect time to be in our industry. Those that think positively about the current environment, and those that are willing to back themselves, will absolutely flourish in the months and years ahead.
Wishing you every success in your real estate career.
Manos Findikakis is the CEO and co-founder of the Eview Group.