Conveyancing Queensland COVID’s impact in HOUSING MARKET

How COVID has impacted the HOUSING MARKET in Australia The uncertainty associated with the COVID 19 pandemic has created remarkable…

How COVID has impacted the HOUSING MARKET in Australia

The uncertainty associated with the COVID 19 pandemic has created remarkable changes in the Australian housing sector. Spot On Conveyancing Queensland has been monitoring the housing market and the trend has been a little different since the pandemic started.

According to KPMG Economics Analysis, most Australian capital cities were expected to achieve strong property growth over four years in the pre-covid scenario. But the onset of the Pandemic saw a downfall in prices during the June quarter of 2020.

Over the course of two years, real estate prices were significantly impacted by the city shutdowns, cuts in interest rates, and the rising popularity of regional living. The extent to which the Australian government would curb the Pandemic’s blow was unknown. But fast forward two years, the property market has witnessed a turbulent ride, and the overall dynamic remains fluid.

Increasing housing prices

Before the interest rate rises of 22, we saw a trend during COVID of low-interest rates and government grant reliefs boosting consumer confidence and stimulating demand for real estate. In addition, in some states, first-time home buyers were given incentives to help make their purchase, which also pushed the number of buyers in the market up.

The unprecedented growth resulted in a sharp decline in the supply of Housing, pushing prices up in an already competitive environment. According to CoreLogic’s Home Value Index, property values jumped from 2.1% in April 2020 to 24.6% in February 2022.

High Rent Value Growth

Data from CoreLogic Rent Value Index, which tracks rental valuations across Australia, showed a sharp spike throughout 2021. The annual rent value for the year 2021 grew at its highest level since 2008 and continued to grow throughout the last quarter. Despite the growing affordability concerns, the median advertised rent in Melbourne, Adelaide and Canberra stood at $480, $492 and $690 per week, respectively.

CoreLogic Experts believe that growing affordability concerns could have a negative impact on house rentals as more residents will try to find alternative ways to minimise costs.

High Household Debts

Australian households are one of the most indebted in the world, with an approximate credit amounting to 120% of annual GDP.

When the RBA reduced the official cash rate and gave access to more cheap credit in 2020, it broke new records of debt levels. The market volatility increased due to such stimulus, and as of January 2022, the credit record peaked at $2 trillion.

Through the third quarter of 2021, the household debt-to-income ratio reached a record high of 140.5%. If the income does not grow proportionately with rising household debts, it can lead to a spike in mortgage stress and make the Australian Economy more vulnerable, which looking at the recent interest rate rises, seems to already be playing out.

Exodus From Cities Widens Growing Gap between House and Unit Values

Until January 2022, the discrepancy between Australia’s houses and units reached soaring heights, while both properties types saw price rises over the pandemic, units increased by 14.3%, and house prices increased by 24.8%. According to CoreLogic, the buyer’s pool and the impacts of covid were two primary contributors to the gap.

With the rise of remote working and a larger number of people being forced to spend time at home, these standalone properties became more preferable. Another impact covid had was the move away from Australia’s main cities, with the lockdowns hitting our main cities more regularly, many people became more open to a sea change. Data from Corelogic report that occupancy across regional Australia had increased over 36%. Even after borders were re-opened, the wave of migration from cities to regional areas continued to take an upward path.

Government policies such as the Homebuilder grant also helped push the demand for these properties, as an already crowded market became even busier.

What Will Happen to Prices Long Term?

According to an analysis of KPMG’s research paper titled “Impact of COVID on Australia’s Residential Property Market,” growth of home prices should steady out over the coming years.

The research further stated that Australia may have 1.11 million [Page 7, 1st para] fewer people than it might have without COVID-19 by 2030. The slow population growth could put downward pressure on house prices, but this factor was outweighed by the lower mortgage rates, which consequently contributed to increased property rates.

As a result, analysts expect demand and supply factors will build pressure on the market to cool down. Eventually, with the lower population growth and rising interest rates already, the price growth will likely temper over the next 2 to 3 years, which we are starting to see signs of.




Spot On Conveyancing Queensland


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