Despite expectations Australia’s capital city house prices will continue to skyrocket, prospective buyers still see themselves ‘in the game’.

Market sentiment has lifted to an unprecedented high, according to NAB’s latest quarterly residential property survey.

Economists at the ‘big four’ bank forecast prices in Australia’s major centres to swell 19 per cent for 2021 and a further four per cent next year.

Even so, a national survey by comparison site Finder indicates almost three million Australians plan to buy property in the next six months.

Seven per cent of the 1015 respondents said they were looking for an investment property and another seven per cent want to buy a home.

The poll also suggests more than five million Australians would take the plunge during the remainder of 2021 if they could afford to.

While low interest rates and strong income support have propelled the 2021 boom, NAB believe their impact may already have started to fade.

It’s an assertion supported by the latest ABS figures showing the number of first-buyer loans dropping for the fourth consecutive month.

However Finder home loans spokeswoman Sarah Megginson said financial preparedness remains key to prospective buyers getting a foot in the door.

“In a hot property market it’s understandable that many are worried about affordability and getting priced out of the market,” she said.

“Fortunately there are many ways to enter the market and it’s not a race.”

NAB argues government incentives have been only “moderately significant” in helping first-home buyers into the market sooner but Ms Megginson said they can be worth tens of thousands of dollars.

Finder found 27 per cent of Millennials are in the market for a new home or investment property, compared to 17 per cent of Gen Z, nine per cent of Gen X and four per cent of Baby Boomers in the next six months.

CoreLogic’s Property Market Indicator Summary shows there were 1849 homes taken to auction across capital cities last week.

That was down from the initial 2153 expected with Melbourne, Sydney and Adelaide in COVID-19 lockdown.

However this time last year, 1326 capital city homes were taken to auction.

Of the 1509 of last week’s results tallied on Monday, 74.8 per cent were successful, down from the previous week’s preliminary clearance rate of 76.3 per cent but well beyond the 54.1 per cent of reported successful auctions for the same week in 2020.

Longer term, CoreLogic’s figures for the three months to June show 31,605 capital city homes taken to auction, marking the busiest quarter in three-and-a-half years. Results were also robust.

“A combined capital city clearance rate of 75.7 per cent sits well above the historic average clearance rate of 63.5 per cent,” head researcher Eliza Owen said.

“The strong result also coincided with a 6.2 per cent uplift in dwelling values across the combined capitals, well above the previous decade average quarterly growth rate of one per cent.”

Even so, Ms Owen said there had been a recent easing of clearance rates which likely indicated the March quarter (80 per cent) as the peak period for the current property cycle.

Construction is now underway on the Ferny Grove Central project, a $140 million development set to shake up the eponymous Brisbane suburb.

With the ribbon set to be cut in late 2023, the self-styled Transport Oriented Developed (TOD) will see a mixed-use development adjoining the Ferny Grove Railway Station.

The site will combine apartment living, an entertainment precinct, a 12,000-square-metre retail centre and a 1,400-spot multi-level parking facility for commuters.

Honeycombes Property Group managing director Peter Honeycombe said reaching the “starting line” of the Ferny Grove Central project days after the Olympics announcement made the milestone even sweeter.

“While the Ferny Grove Central project has been seven years in the planning, it is immensely rewarding to finally get to the starting line and to start construction on the project today,” he said.

“It’s somewhat symbolic that it comes within days of Brisbane being announced as the 2032 Olympics host city with the opportunity to showcase our city and region to the world.”

The build contract for the project – a joint venture between Honeycombes Property Group and real estate investment firm MaxCap Group – was handed to Broad Construction, a Perth-based subsidiary of CPB Contractors and part of CIMIC Group (ASX: CIM), in March this year.

CPB has been involved with a number of high-profile works in Queensland, including for the Brisbane State High School, the Brisbane City retail and commercial developments at 155 and 170 Queen Street Mall, and the Kingaroy Hospital.

Honeycombes Property has today detailed plans for the area’s residential hub, saying it will comprise of 82 luxury apartments (featuring one, two and three-bedroom units) and a recreational deck for residents. The precinct is also set to include improved pedestrian and cyclist connections.

“We see this as a very important urban renewal project for Ferny Grove and for Brisbane’s north-west and we’re passionate about projects that breathe new life into communities and that create a neighbourhood village atmosphere with all modern amenities that people want,” Honeycombe said.

“We have already received a high level of unprecedented interest from the local market, highlighting the level of demand for both residential apartments and retail opportunities and with construction now commencing we believe that will quickly accelerate interest in both sectors.”

Local retailers, too, have snapped up spots in the precinct. Supermarket giant Woolworths and liquor chain Dan Murphy’s have signed up as anchor tenants, along with a Goodlife Health Club, Goodstart Early Learning Childcare centre and Cinebar Ferny Grove.

The launch was attended by a host of Federal and State MPs, including Minister for Defence Peter Dutton and Queensland Transport and Main Roads Minister Mark Bailey. The Queensland Government has so far chipped in $9 million to the project while the Federal Government has contributed $11 million under the Urban Congestion Fund.

“This project brings to 66 the total number of Urban Congestion Fund projects around Australia that are completed or underway. A further 50 are expected to start construction this year,” said Federal Minister for Communications, Urban Infrastructure, Cities and the Arts Paul Fletcher.

“This is just the latest example of us delivering on our commitment to progress critical infrastructure projects across the country under our record $110 billion, 10-year infrastructure investment pipeline, which is helping to drive Australia’s world-leading economic recovery.”

With more than 800 full time jobs supported by the development, including about 285 directly tied to the construction project, Queensland Transport and Main Roads Minister Mark Bailey said the project would provide significant community benefits in terms of jobs.

“As we focus on economic recovery from Queensland’s strong COVID-19 response, jointly-funded projects like this provide significant community benefits and local construction jobs,” Minister Bailey said.

“Building better infrastructure for local communities and commuters is a focus of Queensland’s $27.5 billion pipeline of road and transport upgrades.”

Construction of Ferny Grove Central is expected to take 28 months.

The Olympics should work as a positive influence on Brisbane housing market conditions, however, with the Games still some eleven years away, the flow on effects are likely to be gradual and centred around significant infrastructure upgrades and the associated medium-term uplift in jobs and longer-term improvements in transport efficiency.

The most significant positive influence on the housing market is likely to be seen in the years leading up to the Olympics, rather than during the four weeks of the Olympic and Paralympic games themselves.  

Large infrastructure projects tend to have a positive influence on housing prices, with the extra requirement for workers creating additional demand for housing during the construction process.  

Large projects also tend to leave a legacy of a permanent housing demand uplift, either through additional employment or via other benefits such as improved transport options and travel efficiencies related to transport infrastructure projects as well as additional amenity introduced to the area including social and retail outlets. 

As more detail comes to light about where these projects will be located we should get a better understanding of the housing market opportunities, however the obvious candidate for an uplift in demand is Woolloongabba and the surrounding suburbs.  

The proposed billion-dollar overhaul of the Gabba stadium is set to be the epicentre of Olympic activity.  Along with the Cross River Rail terminal and plaza, this precinct is likely to see a lift in desirability.  

The area is already popular with investors, with around two thirds of the housing stock in and around Woolloongabba being rented.  The proximity of the Princess Alexandra Hospital and Mater Hospital provide a permanent level of localised housing demand, along with easy access to the Brisbane CBD, local universities and Southbank precincts.  

Currently, Woolloongabba unit prices are at the lower end of the inner south unit markets with a median unit value of $458,000; about $94,000 lower than Kangaroo Point’s median unit value, $85,500 lower than West End and $38,000 lower relative to South Brisbane. The lower price point combined with upcoming capital investment on infrastructure are likely to be a popular combination with investors and developers alike.  

Other areas set to benefit would be the proposed sites for athlete villages, earmarked for Hamilton and Robina, along with areas set to benefit from transport infrastructure upgrades including the Gold Coast and Sunshine Coast via upgrades to the M1 Pacific Motorway and Bruce Highway which could be accelerated.

Australia’s lending industry remains globally competitive amid the uncertainty brought about by the COVID-19 pandemic, with 125 financial institutions providing a total of $9.12 trillion in gross lending value to housing-related loans over the first five months of 2021.

Despite this volume, only 10 banks have accounted for over 91% of the market, according to the latest Australian Prudential Regulation Authority (APRA) data.

Below, we take a closer look at the lending market and reveal the country’s biggest lenders.

Also read: Revealed – Australia’s top brokerages of 2021

The biggest banks and ADIs by lending volume

APRA regularly releases banking statistics on Australia’s Authorised Deposit-taking Institutions (ADIs). These are financial companies licensed by the government to provide banking services and accept deposits from the public.

Among the 10 biggest ADIs that dominate the mortgage industry, it is no surprise that the country’s four biggest banks have retained the highest ranks. In fact, gross lending figures from Commonwealth Bank, Westpac, ANZ, and NAB comprise 77% of the entire lending sector.

Here are the 10 biggest lenders in Australia based on gross lending volume and market share from January to May 2021.

1. Commonwealth Bank of Australia
2. Westpac Banking Corporation
3. Australia and New Zealand Banking Group Limited
4. National Australia Bank Limited
5. Macquarie Bank Limited
6. ING Bank (Australia) Limited
7. Bendigo and Adelaide Bank Limited
8. Suncorp-Metway Limited
9. Bank of Queensland Limited
10. HSBC Bank Australia Limited

1. Commonwealth Bank of Australia (CBA)

• Gross mortgage lending: $2,365.7 billion
• Residential mortgage lending: $1,564.7 billion
• Housing investment lending: $801 billion
• Total market share: 25.9%

One of Australia’s Big Four, CBA is a multinational bank that offers an expansive menu of financial services, including personal and corporate banking, credit cards, personal loans, and home loans.

Headquartered in Sydney, the bank has more than 1,100 branches and 4,300 ATMs nationwide. It also conducts business in Asia, New Zealand, the United States, and the United Kingdom. Moreover, the PT Bank Commonwealth in Indonesia and ASB Bank in New Zealand are subsidiaries of CBA.

Borrowers can take advantage of CBA’s Extra Home Loan program on top of the bank’s fixed rate mortgages. This allows first time buyers to access discounts for the life of the loan and on upfront costs through an introductory interest rate.

2. Westpac Banking Corporation

• Gross mortgage lending: $2,050.1 billion
• Residential mortgage lending $1,164 billion
• Housing investment lending: $886.1 billion
• Total market share: 22.5%

Also one of the Big Four, Westpac is the first and oldest banking institution in the country. It was founded in 1817 as the Bank of New South Wales and was rebranded after acquiring the Commercial Bank of Australia in 1982.

Westpac now has 1,204 branches nationwide and provides wealth management and investment banking services to clients worldwide.

Besides conventional retail banking, it offers a wide range of mortgage products for home buyers and real estate investors alike. In fact, Westpac has the highest gross investment lending value among the largest lenders on this list.

Moreover, Westpac offers mortgage loans with reduced rates of up to six months for a home renovation. Borrowers have the option to make extra repayments with no break costs under the Rocket Repay home loan program.

Also read: Best home loans for first home buyers

3. Australia and New Zealand Banking Group Limited (ANZ)

• Gross mortgage lending: $1,314.5 billion
• Residential mortgage lending: $877.5 billion
• Housing investment lending: $437 billion
• Total market share: 14.4%

Based in Melbourne, ANZ is one of the Big Four and Australia’s third largest bank by market capitalisation. Like Westpac, it offers global wealth management and investment banking services.

ANZ is well known for its personal banking program that links customers to specialists and financial advisers who can walk them through their mortgage and financial offerings.

Like most financial institutions on this list, ANZ allows customers to bundle products together to avail of home loans at lower rates. Borrowers can conveniently use their online loan calculator and review a property’s profile report before making a purchase.

4. National Australia Bank Limited (NAB)

• Gross mortgage lending: $1,313.2 billion
• Residential mortgage lending: $810 billion
• Housing investment lending: $503 billion
• Total market share: 14.4%

The last of the Big Four banks, NAB offers similar personal and corporate banking services as other lenders on this list. However, it is one of the country’s first providers of the Defence Home Ownership Assistance Scheme (DHOAS).

This program gives Australian Defence Force members access to expert mortgage advice and home loan products at lower interest rates.

Additionally, NAB has a strong online platform that allows borrowers to use a variety of tools for calculating repayments, home equity, and selecting the most suitable loan for their financial situation.

With 1,590 branches in the country, the key service area of NAB is Australia, but it also serves clients in New Zealand and Asia.

5. Macquarie Bank Limited

• Gross mortgage lending: $315.2 billion
• Residential mortgage lending: $183.5 billion
• Housing investment lending: $131.7 billion
• Total market share: 3.5%

Based in Sydney, Macquarie is a financial services company and investment bank that serves clients worldwide.

In addition to conventional banking, Macquarie offers forex, equities, commodities, and money market trading services. It also has provided residential mortgage products since the early 1990s.

The bank offers extensive and flexible home loan products to borrowers. You can easily lock in on the best fixed and variable rate home loans through their website after using a variety of mortgage calculators to help you decide.

Furthermore, Macquarie lets you create up to 10 offset accounts to split your loan and save on interest rates. You may also opt to make extra repayments to pay the mortgage off faster.

Also read: Mortgage jargon explained: Making extra repayments

6. ING Bank Australia Limited

• Gross mortgage lending: $258.9 billion
• Residential mortgage lending: $217.5 billion
• Housing investment lending: $41.4 billion
• Total market share: 2.8%

A subsidiary of the multinational Dutch bank ING Group, ING Bank is the largest direct savings bank operating in Australia.

It provides consumer and corporate banking services, as well as various insurance products, superannuation, and mortgages.

Additionally, ING has an optional “Mortgage Simplifier” program that lets borrowers make extra repayments for free and conveniently redraw their money. Being an online-only lender, you can potentially pay off your loan faster due to the absence of annual and transaction fees.

If you want to compare home ownership, refinance, and investment loans, you can use ING’s online calculators or chat with their banking advisors through the website.

7. Bendigo and Adelaide Bank Limited

• Gross mortgage lending: $248.3 billion
• Residential mortgage lending: $170.8 billion
• Housing investment lending: $77.5 billion
• Total market share: 2.7%

Founded in 1858, Bendigo Bank is among the oldest banks in Australia to specialise in retail services. It also became the first financial institution in the country to introduce Visa debit and credit cards in the 1980s.

It eventually merged with Adelaide Bank in 2007, and the new company now has more than 400 branches nationwide.

Bendigo offers personal savings accounts, credit cards, insurance products, and mortgage loans. It’s also the first financial institution in Australia to develop a mobile-only digital bank.

The bank also places special emphasis on ethical lending in developing Bendigo Express, a home loan assessment program that uses artificial intelligence (AI). Borrowers can expect faster mortgage processing times through the Bendigo Express Home Loan program.

8. Suncorp-Metway Limited

• Gross mortgage lending: $211.8 billion
• Residential mortgage lending: $151.2 billion
• Housing investment lending: $60.6 billion
• Total market share: 2.3%

Headquartered in Brisbane, Suncorp-Metway is one of the largest mortgage lenders in Australia that offer general insurance. It also provides banking, superannuation, and wealth management services in New Zealand.

First time buyers can benefit from the bank’s “Deposit KickStart” program, which allows borrowers to use a guarantor’s equity on an existing home to qualify for a mortgage.

Like most large lenders on this list, Suncorp bank has numerous loan calculators for comparing home loans, computing stamp duty costs, and refinancing.

You can complete the pre-approval online in just 10 minutes and wait for a lender to call you the next banking day. If you are unsure about your options, you can use their 100% obligation free financial consultation service with a finance professional.

Also read: The 10 biggest banks in Australia: A home buyer’s guide

9. Bank of Queensland Limited (BOQ)

• Gross mortgage lending: $148.4 billion
• Residential mortgage lending: $90.3 billion
• Housing investment lending: $58.1 billion
• Total market share: 1.6%

This Brisbane-based lender specialises in providing banking services and insurance for small to medium enterprises. It also provides retail banking through its 160 branches in Australia.

In the early 2000s, BOQ adopted a franchise model as a vital part of its expansion. The bank currently has more than 95 branches operated by owner managers who, in turn, are paid commissions on the loans they generate.

Regarding mortgage products, the bank has a wide range of home loan options for both owner-occupiers and property investors. These include conventional fixed and variable rate loans, as well as line-of-credit mortgages.

Furthermore, BOQ has its own version of simplified home loans that allow mortgage offsets, unlimited additional repayments, and unlimited free redraw.

10. HSBC Bank Australia Limited

• Gross mortgage lending: $112.3 billion
• Residential mortgage lending: $80.2 billion
• Housing investment lending: $32.1 billion
• Total market share: 1.2%

HSBC Bank Australia Limited is a subsidiary of HSBC Holdings plc in London, making it the largest foreign financial institution in Australia.

Founded in 1985 and headquartered in Sydney, HSBC Australia provides personal banking, cash management, payment, financial forwarding, and trade finance to local customers.

This bank also offers flexible home loan options in which they can bundle multiple products to get lower interest rates. You can use HSBC’s intuitive online calculators to compare various owner-occupied and investor loan plans.

For instance, HSBC has a basic Home Value Loan program that comes with unlimited free extra payments without ongoing monthly service fees.

If you should choose a variable rate mortgage, a relationship manager from the bank will guide you through the process.

Australia’s 13.5 million members of superannuation funds enjoyed their best performance since 1986-87, and property and shares played a major part.

The Rainmaker Default MySuper Index, which tracks the performance of superannuation funds’ default products, recorded a 2020-21 financial return of 18 per cent after fees and taxes.

The 2020-21 performance is the best recorded by Australian superannuation funds since the 1986-87 financial year, which was just before the 1987 market crash.

The best performing assets for Australian superannuation funds

Listed property and shares were the best performing assets for Australian superannuation funds.

These returned 33 per cent and 28 per cent respectively.

Global infrastructure returned 20 per cent although unlisted property returned only 3.6 per cent.

Debt securities performed poorly with local bonds and international bonds returning -0.8 per cent and 0.2 per cent. With interest rates near zero, cash followed suit.

Alex Dunnin, Rainmaker’s executive director of research and compliance said the performance meant total earnings came in at $520 billion, equating to $39,000 per member.

“This is three times the amount of all the money everyone contributed into their superannuation accounts through the year, six times the amount of all the compulsory Superannuation Guarantee contributions or 17 times what was paid in fees,” he said.

ESG funds no longer outperforming

One curious trend that was different from last year was the performance of ESG super funds, or rather the lack of.

Last year, ESG funds were outperforming their peers with Rainmaker’s ESG superannuation indexes regularly over 1 per cent above standard indices.

But on a 12-month basis, the index tracked 1.6 percentage points below the standard index over the past year.

“Super fund ESG investment managers seem to right now be under-performing some of the major ESG capital market benchmarks,” Dunnin noted.

“As important as ESG is, the primary job of super funds will always be delivering the maximum investment returns they can.”

For a very brief period young people were able to get a look into buying property but now the pendulum has swung back drastically.

For a moment, Australia’s housing market was about the young. People were getting into their first home. First-home buyers were ascendant and it was a glorious and hopeful time. A time when dreams were made into reality.

That time is over. Show up at an auction and a 51-year-old man will climb out of his Porsche and bid against you, until you are forced out of the bidding and he adds a dozenth home to his portfolio. i.e. Australia is back to normal, as the next graph shows.

That’s right, as the graph illustrates, we are back to a world where investors borrow a greater share of new home lending than first homeowners.

This is usual for Australia – it was only for a short period there at the end of 2020 that investors got nervous enough to disappear for a moment, and the way was made clear for young families to finally buy their own home. (We saw a similar brief swap back in the global financial crisis of 2008-09.

What does this mean?

House prices have been rising at an extremely rapid rate. The average price of a home in Sydney went up by a staggering 13.5 per cent over the last 12 months according to CoreLogic. That is a staggeringly fast growth rate – if prices rose that fast in a sustained way, prices would double every 5.5 years!

The return of investors to the market is both a cause and an effect of rising house prices. Investors want the capital appreciation – they would love their investment to double every 5.5 years! So they are attracted to markets with rising prices.

The more investors are in the market, the more bidders there are at every home auction, the more money people are willing to spend and the more houses sell for.

I feel bad for first home buyers who are squeezed out, but I don’t want to pile on housing investors too hard.

Obviously they don’t take houses out of circulation (except in the rare case of leaving an apartment vacant, a phenomenon people love to talk about, but which you rarely actually see.)

Everyone who rents in the private market depends on a housing investor somewhere. Rental homes are a vital product in the Australian economy that we almost all depend on at some point in our lives. Yes, some landlords are heartless and rent out mouldy homes, but some are patient and don’t even lift rents every year.

Rents, by the way are up far less than property prices. Capital city rents are up 3.3 per cent and rents in regional areas are up 9.3 per cent. In that sense, it’s not such a bad time to be renting – in relative terms it is getting cheaper!

Why is property investing so popular in Australia?

One answer is negative gearing. If you have an investment property and spend more money on it every year than you receive in rent, (i.e. mortgages, rates, insurance, repairs and maintenance are less than rent), that loss counts as a tax deduction. This is known as “negative gearing” and it is a popular investment approach.

Of course, you haven’t ended up ahead at this point. You can’t make more from a tax deduction than you lose running the property. You still need to make a gain on the value of the home for it to actually work as an investment.

Luckily there’s another tax break for investors – the capital gains tax discount. When they sell the property, they need only pay tax on half the profits, (assuming the property has been owned for over a year).

Laws can change. But will these laws? The Labor Party took a couple of policies to the last election – abolishing negative gearing on established properties and reducing the capital gains tax discount.

They got flogged at that election and dumped those policies. You can pretty much guarantee no party will have the courage to try to change those rules again for some time. The rules around investment property are probably pretty safe.

Where is the investor frenzy hottest?

As the next graph shows, investors are spending most in New South Wales, where they borrowed almost twice as much as First Home Buyers in May. The only parts of the country where the pattern is reversed are WA and NT.

First home buyers are struggling to keep up. The average loan size for a first homebuyer is now $465,000, up from $355,000 in 2017. How big do the loans have to be to beat out all the property investors?

With interest rates at record lows, loans are easy to service, but the risk for the young first homebuyer is that rising rates in a few years make that loan hard to afford. And unlike a property investor you don’t have rent coming in to help you pay it off.

Australia’s young people look set to be stuck renting until something major changes.

They turned out in droves for the auction.

On a bright, sunny Saturday a few weeks back, the bidding was furious, jumping in lots of more than $100,000 and even multiples. By the time it was over, in less than half an hour, the house was under the hammer for a town record of $5.27 million.

The property, perched on a steep rise across the road from a pandanus-lined headland, is a nice place. Tasteful with never to be built out panoramic views of the Pacific, it has been split into two apartments. Only a thin strip of asphalt separates it from a bushy track that leads to a nook of northern NSW coastal perfection.

But $5 plus million? The town, a couple of hours south of the Queensland border and the madness and mayhem of Byron Bay, is studded with fibro and frangipani and boasts a dilapidated pub. For decades a sleepy little fishing haven, it largely was overlooked by the glamour set jetting into Byron. Until now.

Like many quiet corners of the country, real estate prices have gone mad. The frenzy, driven mainly by escapees from the Big Smoke, shows little sign of slowing. And while the official figures point to a rise of around 10 per cent across regional NSW in the past year, the situation on the ground suggests otherwise.

Anything with water views, or proximity to a beach, has seen meteoric price rises. From just three years ago, prices have doubled and, in some cases, trebled leaving rusted=on locals flushed at the prospect of newfound wealth but fearful for the future of their families.

Can it continue? Or is this just a bubble within a much bigger bubble?

The economics make no sense

Across the nation regional real estate gains have leapt ahead of their capital city counterparts. Apart from a brief period between 2002 and 2004, when the first round of retiring baby boomers opted for sea and tree changes, this is a new phenomenon.

It began last year when the nation was in lockdown. Regional Tasmanian real estate leapt 12.8 per cent as the country tried to come to grips with strict isolation policies, both internal and international.

During last year’s horror stretch, CoreLogic data showed NSW rural and regional prices leaping 8.8 per cent, South Australian bush notched up gains of 7.8 per cent with outback Queensland in hot pursuit with a 7.3 per cent hike.

Nationally, regional property prices surged 13 per cent in the 12 months to April, according to property data group CoreLogic, more than double the rise in capital cities of 6.4 per cent.

The surge has built a momentum all its own. Everyone now wants a slice of the great Australian dream. Fuelled with near free money and using the inflated values of their city properties as collateral, they’ve quickly bid up the price of regional Australia and narrowed the value gap between cities and the bush.

The economics don’t make any sense at all. Take our example above. It’s too far to commute to the city for work, at least on a regular basis. And even though rents have been pushed out of the ballpark amid the frenzy, at that price, there is no way you could ever make a commercial return on your investment.

Even with negative gearing, you’d need a mighty big income to service that kind of debt unless you’d cashed in a city property at hugely inflated prices to make the move.

Where is all the money coming from?

Good question. By the time the pandemic hopefully has ended, the federal government would have pumped more than $311 billion into the economy through health and crisis relief.

That money will continue to provide stimulus for the next few years.

Then there is the easy credit. The banks have relaxed their lending standards since the pandemic outbreak and money is cheap.

But that still doesn’t explain the huge ramp up in prices.

Even the Reserve Bank is grappling with the financing dynamics. In a Freedom of Information request by my colleague Dan Ziffer, an internal RBA discussion panel raises the apparent disconnect between only moderate credit growth and a strong rise in loan commitments.

And they wonder whether the federal housing stimulus programs merely have brought demand forward.

In short, they don’t know either.

OMG. Will WFH last?

Technology and the acceptance of remote working may have altered the dynamics. It’s now de rigueur to hold daily, multiple teleconferences.

If the COVID pandemic has proved anything, it is that the workplace is mobile and that productivity can be maintained with workers dispersed across cities and the nation. If there was any doubt, that’s been dispersed by the official assignation of an acronym.

Yup, in workplaces across the land, emails about WFH litter the inboxes of millions of employees.

How much of this, however, has been born out of necessity?And once the pandemic has receded, will we gradually will revert to our old ways? Humans are social animals and crave personal contact. Isolation is not normal.

If we do head back to toil in towers in the urban hubs, the rush from the cities may well not just abate, but slam into reverse.

That sure would be a dampener on the rural property boom.

A great city exodus? Or just a statistical blip?

The price rises have been accompanied by a highly unusual demographic pattern. In the second half of last year, for the first time in living memory, the populations of major cities such as Sydney and Melbourne declined by more than 20,000, according to the Bureau of Statistics.

Brisbane and Perth added to their totals but nowhere near enough to make up for the exit from the bigger cities.

For some, that was all the proof they needed to proclaim the trend was real, and here to stay and that city dwellers seeking refuge in the regions would continue to drive regional real estate prices. But the story isn’t quite so simple.

The pandemic had two major effects. Not only did it stop immigration and hasten the departure of many foreign workers, resulting in fewer big city dwellers, it also had a profound impact on internal movements.

There’s no doubt been an exodus to the bush. But other factors are at work.

In a normal year, as the kids of regional families leave school, many head to the cities, either for work or education, resulting in a population drift from the regions to major urban centres. Other older workers seeking greater opportunities and higher pay also make the shift

That didn’t happen last year, helping skew the numbers. And as they held on to their homes, properties became tight. Add in the influx of retirees and refugees and you get turbocharged prices.

If the pandemic ever does abate, we may see a return to more normal behaviour, although what constitutes normal in a property-obsessed nation like Australia is becoming an ever more elusive concept.

In good news for our state’s tightening rental market, investor finance in Western Australia increased 164 per cent ($453 million up from $171 million) in April 2021 compared to April 2020, according to the Australian Bureau of Statistics (ABS).

This is on top of the March 2021 improvement, which saw investor finance come in at $441 million, up 94 per cent from $227 million in March 2020.

The trend is clear and the reason for it is obvious – there’s never been a better time to invest. Strong capital gains, record-low interest rates and a volatile stock market are making the perfect storm for investing in the nation’s safest asset – bricks and mortar.

Price gains for apartments are beating those for houses in a growing number of suburbs around the country, as worsening affordability and a lack of stock encourage buyers into high-rise living.

Latest data from CoreLogic found that apartments around Australia have exceeded house price growth, with affluent areas boasting the most positive movement.

Apartments in Leederville saw a price growth of 9.7 per cent over the past 12 months, in comparison to the 1.7 per cent posted for houses. The gap in prices also spiked to about 50 per cent during the same period.

One of Australia’s biggest mortgage brokers, Australian Finance Group (AFG), expects property investors will continue returning to the market, potentially filling the gap left by retreating first homebuyers.

After figures early this month showed house prices had again surged in May, AFG CEO David Bailey said investors were making up a bigger share of its new lending and he expected the trend had further to run.

“Coming through the other side of the pandemic, my view is that as first homebuyers, particularly those who look at apartments and smaller places and so forth, come out of the market that volume will probably be replaced by investors,” he said.

It’s a trend common of housing booms – the retreat of first homebuyers is followed by stronger lending to investors due to the latter being typically more able to access credit, as they’re likely to already own property and have higher incomes.

So, while rising prices may not be great news for first homebuyers who may find the market increasingly difficult to enter, for property investors rising prices are an incentive to get into the market to take advantage of what they hope will be yet another long-term period of very strong housing price growth.

Banks are adding to the investor frenzy, as they compete for a share of the burgeoning investor pie. Late last month National Australia Bank announced it was cutting its variable principle and interest rate for investors by 30 basis points to 2.79 per cent – the lowest variable rate of a loan in that category across the big four banks.

So, whether you’re a first homebuyer or investor, it’s clear there’s never been a better time to invest and that time is of the essence.

More than half of the country’s detached housing markets have become unaffordable for tenants as dwindling rental
supply fuels large rental price increases in many areas. Of the 2809 house markets assessed by Suburbtrends, 51 per cent require families to spend more than 30 per cent of their household income on rent. Renters in Byron Bay
now need about 75 per cent of their income to pay their rent. In 164 suburbs, households need more than half of
their income to pay the rent on an average three-bedroom house.
Rental prices for three- and four-bedroom houses have risen to as high as 79 per cent of median household
incomes in suburbs such as Main Arm and Byron Bay in the Richmond-Tweed region of NSW and Oaks Estate in
the ACT. Closer to the capitals, families in Mosman on Sydney’s lower north shore are spending nearly two-thirds
of their income on rent. In Melbourne’s inner suburb Toorak, families need more than half of their income to pay rent.
Units and apartments are also becoming unaffordable in a growing number of areas. In more than 21 per cent of the
unit markets, households need more than a third of their income to rent a two-bedroom unit. Tambaroora, in NSW’s
Central West, Villawood in Sydney’s west and Port Adelaide were among the most unaffordable unit markets in the
country where families are using up to 81 per cent of their income on rent.
“The rental shortage has hit regions the hardest. However, greater Darwin, the ACT, greater Hobart and to a lesser
extent greater Adelaide are all feeling extreme pressure with very low vacancy rates and rising rents,” said Suburbtrends
director Kent Lardner. Vacancy rates are currently sitting at 0.6 per cent in Darwin and 0.8 per cent in regional
Tasmania, Queensland, Victoria and NSW. They shrank to 1 per cent in greater Hobart, Adelaide and the ACT.
Louis Christopher, SQM Research managing director, said rental supply was a big challenge for the regions which
were experiencing large population inflow from interstate or from the cities. “It doesn’t take long for a region to reach
full capacity if the population shifts in that area,” he said. “The challenge going forward is that developers won’t
be able to respond by building more homes due to restrictive lending requirements by the banks, so supply will
continue to shrink.”
In some metro areas, the supply of rentals was less of an issue, but the rising rents were driving many households

further out of the city, said Martin North, director of Digital Finance Analytics. “There are a significant number of high-rise builds underway, so rental supply is not the main problem, but rental supply at the right price is,” he said.

“We’re seeing big spikes in rental costs as investors try to recoup losses from the COVID freeze. “Many renters are younger families with more limited incomes and cannot afford to pay more and some of them are moving
further away into cheaper areas, which is putting more pressure there.”
The current undersupply of rental houses will likely worsen when the international border reopens, Mr Lardner said. “Most new arrivals will flood into the vacant units within the cities, but some will go and rent in the suburbs and
regions, which are already experiencing rental shortage,” he said.

First home buyers would get a $25,000 grant to help them enter the market as the NSW government moves to overhaul property tax at the same time as home ownership for people under 40 plummets.

A grant would replace existing stamp duty concessions for first home buyers under the property tax reforms, which would initially allow buyers to choose paying stamp duty or an annual levy.

NSW Treasurer Dominic Perrottet announced his plan to scrap stamp duty and move to a land tax in last year’s state budget, although it will not feature in next week’s budget as consultation continues.

Instead, the government has released a progress paper, which says the proposed reforms could see home ownership rise 6 per cent, allowing 300,000 more NSW residents to buy a home.

It coincides with the government’s intergenerational report, which shows 60 per cent of people born between 1942 and 1951, so-called early baby boomers, owned homes by the ages of 25 to 34.

However, for people born between 1982 and 1991, this has dropped to just 45 per cent.

Mr Perrottet said the intergenerational report contained a “very stark statistic”.

“The message which comes through very clear again and again is the huge challenge of achieving home ownership for our younger generations,” Mr Perrottet said.

House prices in Sydney rose 3.5 per cent last month, one of the biggest monthly gains since the late 1980s, CoreLogic figures show, putting renewed pressure on the state and federal government to address housing affordability. Sydney’s median house price now exceeds $1.1 million.

The progress paper says there were “mixed views regarding how the property tax could impact the ongoing affordability of property in NSW” and whether abolishing stamp duty would “cause upward pressure on prices due to an increase in spending power”.

In its submission, progressive think tank the McKell Institute said: “The introduction of the property tax may place upward pressure on house prices in the short term but the reduction in stamp duty costs will still result in a net positive effect on housing affordability.”

The progress report says “lower up-front costs are expected to particularly benefit first homeowners who have typically had less time than other purchasers to save for a deposit”.

Stamp duty raised $8.3 billion for the state’s coffers last year, with about 75 per cent of that from residential sales. After payroll tax, stamp duty is the biggest source of taxation revenue for NSW.

The government says the reforms would reduce its revenue but “over the longer-term, the property tax would be revenue neutral, collecting the same amount of revenue as stamp duty and land tax”.

Under the proposal, the government would legislate to ensure nobody would be required to sell their home if they could not afford the property tax.

To ensure residential rents would not be affected by the reform, the government would request the Independent Pricing and Regulatory Tribunal (IPART) provide quarterly monitoring reports.

Mr Perrottet estimates up to 50 per cent of NSW properties will be subject to the annual levy within 20 years and that stamp duty on property purchases would be completely phased out by 2050.

Former federal Treasury secretary Ken Henry said the property tax proposal was “just the sort of innovative policy change needed to improve both economic dynamism and fairness”.

Dr Henry chaired Australia’s Future Tax System Review, known as the Henry Review, which was released in 2010 and recommended replacing stamp duty with land tax.

“It will improve housing affordability, especially for first home owners, contribute to labour mobility and reduce the volatility of the state budget over time,” Dr Henry said.

“I hope that the leadership being shown by NSW might ignite a broader interest in tax reform that is very much overdue.”

However, the NSW Opposition’s Treasury spokesman, Daniel Mookhey, said the government had not yet proposed any formal model, and it was clearly not going to be included in next week’s budget.