The 2021 outlook for the Australian property market

Residential property prices are rising and strong gains are forecast for 2021, but the outlook for some other sectors of the Australian property market is more mixed and uncertain.

While demand for residential assets is proving resilient and demand for industrial property unabated, prospects for the CBD office over the next year appear less positive. 

Trilogy Funds Managing Director, Phillip Ryan says that portfolio diversity and understanding the influences on the different parts of the property sector has proven more important than ever in 2020, and as we look to 2021 and beyond.  

“We are optimistic about continued growth in 2021, particularly in the residential, industrial and small commercial sectors, and the potential for investment opportunities they provide,” he said.  

The 2021 outlook for residential property market 

Below we summarise the latest forecasts provided by the big four banks, as well as leading property market analysts SQM Research and CoreLogic for the Australian housing market in 2021. 

SQM Research 

In their latest Boom and Bust report released in December 2020, SQM’s managing director Louis Christopher says he expects Australian dwelling prices to rise 5.0% to 9.0% over the course of 2021.  

He identifies Perth as likely to be the best-performing capital city, with growth of 8.0% to 12.0%, followed closely by Sydney (7.0% to 11.0%) and Adelaide (6.0% to 10.0%). 

Christopher believes upcoming changes to responsible lending laws and improving consumer confidence will be key drivers of this growth. 

He predicts the federal government’s JobKeeper program will be maintained beyond March, as employment support will be essential for the ongoing momentum of the housing recovery. However, even if JobKeeper is not extended and another outbreak of COVID-19 cases was to lead to further lockdowns, he believes national house prices would either remain stable or rise by up to 4.0%, with only Melbourne and Hobart facing potential falls. 


Australia’s housing market continued along a recovery trend through November, says CoreLogic, the largest provider of property information and analytics in Australia.  

Their national house price index recorded a second consecutive monthly rise for the month, with dwelling values up 0.8%. This follows a 2.1% drop in Australian home values between April and September. 

According to CoreLogic’s Head of Research, Tim Lawless, if the current growth trend persists, we are likely to see CoreLogic’s national home value index surpass pre-COVID levels in early 2021.  

“The national home value index is still seven tenths of a per cent below the level recorded in March, but if housing values continue to rise at the current pace we could see a recovery from the COVID downturn as early as January or February, 2021. The recovery in Melbourne, where home values remain 5% below their recent peak, will take longer.” 

ANZ Bank 

ANZ Bank’s Research team expects housing price gains of around 9.0% across the nation’s capital cities in 2021. The bank says this market strength is largely being driven by strong interest from owner-occupiers, with low interest rates appealing to buyers in secure employment. 

The Reserve Bank of Australia’s most recent rate cut to a cash rate of 0.1% p.a., the decline in fixed mortgage rates and the prospect of continued low rates for some years to come will all add to the momentum currently in the market, ANZ believes. 

By their estimates, the average 3-year fixed home loan rate has nearly halved over the past two years, from 4.1% in late 2018 to around 2.1% currently. 

First-home buyers have increased their new loan commitments sharply over the past few months, says ANZ, a story which is consistent across the states. In contrast, investor activity remains soft. 

Fixed Mortgage Rates | Trilogy Funds Australia

Source: ANZ 


Westpac is more cautious than some other observers about the outlook for the Australian economy in 2021 as delayed effects from the COVID economic shock come through, but the bank predicts activity will accelerate strongly heading into 2022. 

It notes that housing-related sentiment has already rallied strongly since August 2020, and Westpac’s ‘time to buy a dwelling’, house price expectations and unemployment expectations indices are now all running at levels better than their long-run averages. 

The bank’s latest Housing Pulse report tips house prices nationally to rise 4% in 2021 and 10% in 2022. It predicts that this strong momentum will be welcome to begin with but will start to test the nerve of regulators and the RBA in late 2022. That in turn will bring policy responses – macro-prudential measures in particular – back into frame. 

Dwelling Price Forecasts | Trilogy Funds Australia

Commonwealth Bank of Australia 

Commonwealth Bank predicts that provided we don’t see a resurgence of the coronavirus, the strength of Australia’s economic recovery in 2021 will surprise many, and the current positive trajectory of house prices will be sustained across next year. 

Dwelling Prices | Trilogy Funds Australia

Source: Commonwealth Bank 

“I don’t think the housing market is a risk any more,” says the bank’s CEO Matt Comyn. “It feels like there’s a lot of demand. There’s certainly a lot of loan application demand and the market’s quite buoyant at the moment.” 

The combination of low interest rates, stimulus measures and the nation’s successful weathering of the health crisis leads the bank to forecast house price growth of 5% in calendar 2021, albeit with variations from state to state. 

In fact, Comyn said, the banking sector may need to watch for signs of potential overheating in the property market next year, given extremely accommodating monetary policy settings. 

National Australia Bank 

Home loan applications at NAB were stronger in November than for any other month in the past two years, and the bank has substantially upgraded its forecasts for economic activity and unemployment. 

The bank says that while the deterioration that the labour market experienced in 2020 would normally have weighed on prices, strong government support had mitigated the rise in unemployment and the hit to household incomes. 

On the basis of these developments, NAB’s outlook is for residential property price rises of around 5% over 2021 and 6% over 2022, with house price growth likely to be stronger than the apartment segment. 

The 2021 outlook for industrial property market 

A record year of leasing demand is expected across industrial property markets in 2021, underpinned by the continued growth of e-commerce, which is driving up demand for warehouse space. 

This is the forecast from Colliers, who noted that even in the midst of a second COVID-19 wave, capital values of prime industrial property in Melbourne rose 6% between the first and third quarters of 2020, as they did across the country to greater or lesser extents. 

A NAB survey of 380 property professionals found that industrial rents and capital values are forecast to remain largely unchanged on a national level over the next two years. 

The 2021 outlook for commercial property market 

Australia’s empty capital-city CBDs were likened to ghost towns at the height of the COVID-19 pandemic. And with an end to the health crisis now in sight they have yet to return to normal, with commuter numbers far lower than the same time a year ago. (Source: CoreLogic, December 2020). 

Many workers who are being encouraged back to the office as the health crisis winds down, would rather continue working from home, at least for a few days a week, and companies are delaying office lease renewals and expansion plans in the face of uncertainty about their future requirements. 

The third quarter of 2020 was the worst on record for Australia’s CBD office markets, says a market review by commercial real estate manager JLL, and looking ahead they expect vacancies to continue to rise and effective rents (i.e. after incentives) to fall further in the face of new supply and subdued leasing market conditions. 

Sydney and Melbourne were hardest hit and may be the slowest to recover. JLL said vacancy rates in the Sydney CBD were currently over 12%, and national property appraisers M3 Property forecast that this will remain above 10% into 2023. 

The NAB survey found office rents and capital values are expected to fall 3.7% over the year to Q3 2021. 

Survey Expectations | Trilogy Funds Australia

Source: NAB 

However, several Fund Managers, including Charter Hall’s Chief Executive, David Harrison, remain optimistic for the longer-term future of commercial property markets. 

“Rising confidence will combine with very low interest rates to drive investor capital toward property, and particularly commercial property yielding two to three times the yield available from buying residential,” Harrison says. 

A steady path ahead 

Trilogy’s Philip Ryan notes, “Overall, we are similarly positive about the property sector moving forward. Continued low-interest rates, government incentives and economic stimulus, and pent-up migration and immigration demand are all likely to continue to drive activity in housing and other property sectors.” 

This article is issued by Trilogy Funds Management Limited ACN 080 383 679 AFSL 261425 (Trilogy) and does not take into account your objectives, personal circumstances or needs, nor is it an offer of securities. Investments in Trilogy’s products are only available through the relevant PDS issued by Trilogy and available at All investments, including those with Trilogy, involve risk which can lead to loss of part or all of your capital or diminished returns. Investments with Trilogy are not bank deposits and are not government guaranteed.   

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