But as we know, those predictions failed to transpire and prices – which are only 0.7 per cent below pre-pandemic levels – are on the up.
So, what does the future hold for a market that defied expectations?
When The New Daily asked a select group of experts for their predictions on how prices would fare in 2021, none would provide a figure.
However, they explained some of the key things to look out for.
Regions will continue to grow
BIS Oxford Economics chief economist Dr Sarah Hunter said if local coronavirus cases remained under control and unemployment remained stable, regional areas and detached houses in smaller capitals should continue to streak ahead.
She said there was still plenty of residual demand from buyers capitalising on buyer’s grants and stamp duty concessions, while fighting a sense of FOMO.
“Falling interest rates improved affordability which helped demand, but supply hasn’t responded all that much yet as the volume of transactions – although they are turning – have not risen anywhere near as much,” Dr Hunter told The New Daily earlier this month.
“In terms of long-term sustainability, there’s still demand shock around [reduced] migration, which will likely make apartments cheaper.”
Struggling investors could also play a role
That’s a sentiment shared by Suburbanite director Anna Porter.
She believes prices for off-the-plan units – or high-rise apartments – will go backwards.
She said it’s largely due to investors wary about the health of capital city rental markets and unlikely to purchase property as demand from international students remains sluggish.
Which, consequently, would drag down both demand and prices.
The exodus of renters at the height of the pandemic, when tenant-heavy industries were hit by job losses, drove vacancy rates in some capitals above 4 per cent.
And data from APRA shows investors have been slow to resume their repayments. Recent analysis by the financial regulator found one-third of deferred loans at the big four banks in October were investment loans.
“There could be a bloodbath that comes to fruition in a short compressed timeframe if people sell in quick succession in areas that don’t have undersupply issues,” Ms Porter told The New Daily.
Impact of deferrals unlikely to be as strong as predicted
Figures from the Australian Banking Association show deferred loans plummeted from 493,440 in June to 169,677 in November – a 66 per cent reduction.
CoreLogic head of research Eliza Owen told The New Daily she expected house prices to continue rising in the first half of 2021, ahead of the conclusion of loan payment holidays.
And other measures are also outweighing any negatives, she said.
Those include historic rate cuts and programs such as HomeBuilder and the First Home Loan Deposit Scheme.
“The only thing worth noting is when you see incentives for first home buyers, for example, it tends to have a vacuum effect where purchases that may have happened anyway are pulled forward,” Ms Owen said.
“Once these schemes run out, we may see demand slow a little bit, and the other thing that could slow price increases is APRA intervention.”
Plenty of bargains likely to be found in apartments
Wakelin Property Advisory director Jarrod McCabe said despite a number of home owners on deferrals as a precautionary measure, suburbs where international students traditionally flocked may become “unstable”.
Those include inner-city areas, middle-ring suburbs near universities and locations where investors converted short-term accommodation en masse into long-term rentals.
“If you’re wanting to be an owner-occupier, it spells opportunity because there could be relatively cheap properties, but whether they’re the right types of property is another matter,” Mr McCabe said to The New Daily.