5 pandemic impacts on the property market: a year on
Australian property markets have shaken off the worst of COVID-19, but while prices are rising and buyers are now out in force, there’s been some major uncertainty and upheaval along the way.
COVID-19 may have created a ‘new normal,’ but the last 12 months have been anything but regular.
The pandemic has had major ramifications for Australian society, and in turn the nation’s property market.
While the property market has emerged in robust health, there has been some major uncertainty and upheaval along the way.
Let’s take a look at five ways the pandemic has impacted the Australian property market.
Market sentiment swings
As COVID-19 worsened in 2020, many predicted that the nation’s property market would experience a major downturn.
In May last year, the National Australia Bank predicted an 11 per cent price drop in 2021.
Clearly that’s not the case as we move further into the year, with the Commonwealth Bank recently upgrading its forecast from an 8 per cent to a 10 per cent price rise.
Far from diminishing demand, COVID has in many cases stimulated market activity.
Enforced savings through lockdowns, record low interest rates, and government stimulus programs have resulted in many Australians having far greater purchasing potential.
The tangible and secure nature of real estate has been sought after by many prospective investors amid the turmoil and uncertainty of COVID-19.
Contrastly, the stock market is often seen as more volatile by investors, although the Australian share market has rebounded strongly from its initial pandemic losses.
As we move further into the year and away from COVID-19, the Australian Reserve Bank’s scenario modelling indicates that house prices will rise 25 per cent between now and the end of 2023.
A stark contrast to much of the market sentiment this time last year.
Accommodation preferences
COVID-19 has reshaped the type of properties Australians are choosing to purchase.
Lockdowns and the resultant work from home phenomenon has seen many prospective buyers favour more spacious dwellings, with dedicated areas for work and study.
There is only so much time you can spend working from your bedroom or kitchen table, so if working from home is going to become a permanent fixture, then accommodation needs to be fit for purpose.
This will have a significant impact on demand from owner-occupier buyers, but will also have flow on impacts for investment purchasing decisions.
Geographic preferences
COVID-19 also saw many re-evaluate where they wanted to live. Unbounded from the office through remote work, and seeking space and clean living; many Australians vacated capital cities and relocated to regional areas.
As a result, prices across many regional areas surged, with Victoria’s Grampians and Queensland’s Noosa recording the biggest house-price rises in 2020 - jumping 16.6 per cent and 14.9 per cent respectively.
While significant, it’s a trend that is set to recede as the threat of COVID-19 diminishes and normality returns.
Regional living can be great, but for many it lacks the economic opportunities, services and lifestyle that capital cities offer.
An early indication of the trend reversal can be seen by the recent rise in regional vacancy rates compared to urban areas - significant as the rental market often acts a bellwether for housing prices.
Tech adoption
While the real estate industry has traditionally been slow to adopt new technologies, COVID-19 lockdowns forced workers and customers alike to embrace innovation.
Remote auction and home inspection technologies allowed the industry - particularly in Melbourne - to continue when personal interactions were prohibited.
While in-person auctions and inspections will continue to be the preference for most, these technologies have now been incorporated into the industry for the long term; and will remain a convenient option for those facing time and geographic constraints.
Post lockdown listing surge
While technology did enable market transactions to continue, many vendors chose to hold back until lockdowns eased and in-person auctions were back up and running.
As a result, once restrictions were lifted there was a bottleneck of buyers and sellers eagerly awaiting to hit the market and make transactions, particularly in Melbourne.
Across the combined capital cities there were 3,791 homes taken to auction across in the week leading up to Easter, according to CoreLogic. It was the busiest auction week since March 2018, with Melbourne leading the charge, recording 1,899 auctions.
Meanwhile 874 homes were taken to auction across the combined capital cities over the Easter week, the busiest on record for what is a traditionally quiet period.
Looking ahead
The last 12 months have certainly been a time of volatility and change for much of Australia’s property market and the nation at large.
Let's hope the next 12 months play out more evenly, as the COVID-19 health and economic recovery continues along its positive trajectory.
