Revealed - COVID's impact on housing market

Where to next? Broker aggregator manager shares thoughts

Revealed - COVID's impact on housing market


By Jayden Fennell

Australia’s housing market has changed dramatically over the past two years of the pandemic, with a new report showing property prices had risen 25%.

CoreLogic has outlined six major impacts on the property market since COVID-19 began, including a boost in first home buyer activity, and the new-found popularity of regional and low-density housing.

Commenting on the report, Simon Bednar (pictured), general manager of major broker aggregator Finsure, said there were many reasons house prices across the country had increased, including continuing low interest rates along with a shift in other investment opportunities.

“It’s also a continuation of the change over the past 20 years where purchases for a home were dominated by owner occupiers, to the growth in real estate investment for rental and wealth generation,” Bednar said.  

“Property prices across Australia's eight capital cities rose by 4.7% in the December quarter of 2021 compared to the corresponding period in December 2020, according to the Australian Bureau of Statistics.”

Australian home values rise by 25%

CoreLogic research found national home values declined 2.1% between April 2020 and September 2020 before soaring amid low interest rates and reduced housing supply.

The property data analysis firm estimated the total value of residential real estate to be $9.8 trillion, which was up from $7.2 trillion two years ago, with the median Australian dwelling value increasing to $728,034. There has been an 25% increase in property prices between March 2020 and March 2022.

First home buyer activity increased drastically

“Having lost ground to first home buyers, investors have started to increase their presence in the market in recent months as affordability continues to be a barrier of entry for first time buyers looking to purchase property in the major cities,” Bednar said.

First home buyer activity spiked when a sizable section of housing demand took advantage of more affordable housing options following the early downturn, along with record low mortgage rates and government incentives.

Bednar said buyers were finding it more difficult to save for a deposit despite having strong serviceability.

“With the end of record low interest rates looming, it is more important than ever for first time buyers to have an experienced mortgage broker by their side when it comes to securing a home loan.”

Rents increased almost 12%

While rental prices underwent a mild decline for the first few months of the pandemic, there was a rapid recovery followed by a powerful surge throughout 2021.

The CoreLogic data also showed annual rent growth was at its highest during 2021 (highest growth rate since 2008). Increased rental prices resulted in investor activity being relatively subdued between 2017 and mid 2020 along with an erosion of rental supply due to the rise of Airbnb across tourism destinations throughout Australia.

Housing debt levels increased to record highs

Rapid increases in housing over the past two years were largely a result of a sizable reduction in the official cash rate, which has not shifted since November 2020.

RBA data showed housing interest payments had fallen to their lowest levels since 1999.

House prices at a record premium compared to units

The record gap was a result of Australian buyers preferring detached houses as people spent more time at home throughout the pandemic.

Government policies such as the HomeBuilder grant contributed to the increase in detached housing due to tight construction timelines to qualify.

Rise of the regions

Migration trends over the past two years revealed a large spike in the volume of people leaving cities for regions outside of lockdown periods and a decline in people leaving regions for cities.

“Demand in regional centres was lower than in the major cities but given the prevalence of COVID over 2020 and 2021 and the onset of work from home/online meetings there has been a rush from traditional city living to tree/sea change,” Bednar said.

Several key regional centres across the country have seen higher than normal growth as a result.

“While state borders have reopened, city-dwellers are continuing to move to the regions at a higher rate than before the pandemic,” he said.

Where to next?

Bednar said areas now considered ‘lifestyle regions’ have become immensely popular, creating  million-dollar markets.

The housing market boom had delivered value gains and a significant wealth boost for many Australian homeowners, however, has created larger hurdles for non-homeowners who want to enter the market.

Bednar said it was likely housing values would start to decline with the potential cash rate increases expected this year.

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