Four years on from when the World Health Organisation declared COVID-19 a worldwide pandemic, CoreLogic research director Tim Lawless has revealed seven ways COVID changed housing trends.
It was four years ago when the World Health Organisation declared COVID-19 a worldwide pandemic. Since that time economic trends, including housing metrics, have been on a roller coaster ride. Although lockdowns and the uncertainty of vaccination programs are well behind us, the legacy of COVID will be with us for a long time yet.
This report provides a retrospective of seven housing and peripheral economic and demographic trends through the pandemic to-date.
1. Housing values have surged since the onset of COVID. CoreLogic’s national Home Value Index (HVI) surged 32.5% between March 2020 and February 2024, adding approximately $188,000 to the median value of an Australian dwelling.
Despite the strength in the headline figures, the housing market has moved through distinct cycles punctuated by changes in policy, interest rates and demographic shifts.
Housing values initially dipped by 1.7% between March 2020 and June 2020 before surging 30.8% higher, finding a cyclical high in April 2022. The market slumped 7.5% as interest rates rose from their emergency lows, but as inventory dried up and migration boomed, housing values commenced a new growth cycle in February 2023, rising 9.5% through to the end of February this year.
2. Rental markets have tightened substantially with vacancy rates holding around 1% and rental growth surging.
Nationally, rents have jumped 32.4% since March 2020, adding approximately $150/week to the median dwelling rent.
3. Monetary policy has played a key role in both stimulating housing demand, but also temporarily quelling activity as interest rates rose from mid-2022. A record portion of borrowers took advantage of fixed mortgage rates falling below 2% through the middle of 2022, fueling speculation of a ‘fixed rate cliff’ as the wave of fixed rate lending terms expired. So far borrowers have navigated higher mortgage rates much better than expected with mortgage arrears holding below pre-pandemic levels.
4. Inflation surged on the back of unprecedented peacetime fiscal stimulus and low interest rates as well as global supply chain disruptions that were amplified by the war in Ukraine. As COVID-related restrictions eased global demand strengthened. Inflation is now beating forecasts, fueling speculation we could see rate cuts later this year.
5. Once lockdowns and social distancing measures eased, labour markets tightened significantly. Although labour markets are now loosening, RBA forecasts have the unemployment rate holding below 4.5% through to at least mid-2026.
6. Demographic factors have influenced housing trends. Housing demand remained strong through the pandemic despite closed borders due to a diminishment in household size. Internal migration trends favoured regional markets through the pandemic but have since largely normalised, and open international borders saw overseas migration spike to record highs.
7. Despite unprecedented housing demand, a supply response is yet to be seen. Dwelling completions have held relatively flat through the pandemic to-date, with supply chain constraints, materials and labour shortages, and a surge in construction costs creating a challenging environment for delivering new housing supply.