Where have property prices leapt most since ‘remarkable’ post-Covid boom?

Four years ago, the world was panicked and confused, cities were locking down their citizens and in the property market, doom and gloom was forecast for property prices.

Rarely have forecasters got it so wrong.

Australia’s collective response to the Covid pandemic was a flight to safety in the regions, a redirection of spending money to property investment, and a concerted effort to bolster savings and pay down debt.

Data released Wednesday (3 April) by PropTrack shows that national property prices have soared 40 per cent in the four years since the pandemic began.

Queensland and South Australia led the nation’s price growth, with home prices up by more than 60 per cent in both states’ regions and capital cities, and the top six performing (SA4) areas falling within these states.

Wide Bay was the strongest performing SA4 region for home price growth, up 80.5 per cent since March 2020. Ipswich (+79.7 per cent), Adelaide-North (+77.6 per cent), Gold Coast (+74.3) and Logan-Beaudesert (+74.1 per cent) rounded out the top five performers since March 2020.

Eleanour Creagh, Senior Economist, PropTrack, described the performance of home prices as “remarkable”.

“Four years on from the pandemic, home prices around the country have staged a remarkable feat.

“From fears of sharp falls through the pandemic, to the expectation of steep declines when interest rates began to quickly climb, home prices have defied the expectations of many, surging 39.9 per cent nationally,” Ms Creagh said.

The supply of properties for sale, population growth, building activity, rental market conditions, interest rates, and interstate and regional migration have all influenced home price growth as well as how it has been distributed Australia-wide since March 2020.

“Through the pandemic strong demand, low supply and record low interest rates combined to drive a once in a generation price boom,” she said.

Coastal and regional areas, along with Brisbane and Adelaide, benefitted most from affordability advantages and pandemic-induced preference shifts resulting in surging property prices.

Four years on and regional home prices have outperformed their capital city counterparts in every state except WA and NT.

Ms Creagh said that since Covid, the housing market has cycled different phases.

“Home prices fell as interest rates quickly climbed, however, as net migration hit record levels, insufficient housing supply coupled with strong demand offset the higher interest rate environment and deterioration in affordability.

“As a result, home prices took off again in January 2023 and that remains the case three months into 2024.”

Brisbane property rivals Melbourne

Regional Queensland (+66.5 per cent) is the highest growth market in the country since the pandemic, according to PropTrack, followed by regional SA (+66.2 per cent), Adelaide (+64.0 per cent) and Brisbane (+63.1 per cent).

The significant growth in Brisbane since March 2020 means home prices are now rivalling Melbourne, one of the slowest-growing markets since the pandemic.

A similar analysis released by CoreLogic found that since the onset of Covid, the big winners were houses and regional areas.

In that four-year period there was $188,000 added to the median value of a home, but house values increased by more than double the number of units, up 37.9 per cent and 16.5 per cent respectively since March 2020.

The significant difference in growth rates reflects a new found preference for space through the pandemic, especially across the capital cities where the difference in growth between house and unit values was the most pronounced.

Growth in regional housing values substantially outstripped growth in capital city values, particularly through the first two years of the pandemic. Regional dwelling values have increased by 47.6 per cent (approx. $197,300) since March 2020 compared with a 28.5 per cent (approx. $186,900) in capital city dwelling values.

Across the broad regions of the country, Adelaide and Regional South Australia have recorded the most significant increase in dwelling values, rising 55.3 per cent and 54.2 per cent since March 2020. The capital cities and regional markets of Queensland and Western Australia also stand out with values rising more than 50 per cent through the pandemic to-date, according to CoreLogic. At the other end of the spectrum is Melbourne where values are up by ‘only’ 11.0 per cent.

Population growth, supply shortages pushing price growth

The subdued performance across Melbourne can be attributed to more frequent lockdowns through the pandemic alongside weak demographic trends. Although overseas migration remains extremely high across Victoria, interstate migration remained in negative territory based on data to June last year.

Although population growth is slowing, net overseas migration looks set to remain above pre-Covid levels over the coming years, placing further pressure on housing demand.

Despite a surge in dwelling approvals and commencements, the number of completed homes has not increased, creating a significant undersupply of newly built housing amid a demand shock.

The pandemic saw several key supply side initiatives, including the HomeBuilder program and an objective from the federal government to see 1.2 million ‘well located’ new homes delivered over the five years ending June 2029.

The HomeBuilder program was a $25,000 grant available for building a new home or substantially renovating an existing home between 4 June and 31 December 2020.

The grant was extended until 31 March but scaled down to a $15,000 grant.

There were 138,101 HomeBuilder grants awarded with a total value of $2.52 billion, exceeding Treasury’s initial forecast by 411 per cent in number and 275 per cent by value.

Despite the surge in approvals and commencements during the HomeBuilder program, the number of dwellings completed remains well below pre-pandemic levels and overall housing supply remains constrained.

The next four years may just match the previous four if population growth and housing undersupply remain the dominant forces they are at the moment.