A drop in investor appetite for high-rise apartments and a push towards lifestyle-centric housing are just some of the trends the COVID-19 pandemic has accelerated, according to property experts.
Many of these trends were already underway in the Australian economy, but the spread of COVID-19 created an economic bubble for many industries, which will likely hold strong for years to come.
Recent developments from countries with further advanced vaccination rollouts suggest that the Delta-variant of the virus is leading to persistently high case numbers.
The virus will persist, as will related disruptions – and this is likely to be the case in Australia too, where the vaccine rollout is far less advanced, despite the recent acceleration.
The federal and state governments have agreed to a four-stage process to open up and live with COVID-19, and the final step arrives when more than 80 per cent of the adult population is fully vaccinated. In substance, it means that Australia, like many other countries, will live with COVID-19.
This is likely to have key implications for Australia’s economy, demographic trends, and the domestic housing market landscape.
Pete Wargent, co-founder of national property buyer’s agency network BuyersBuyers, expects to see a continuation of the current trends well into 2022.
“Many of these trends will be so entrenched (by 2022) that they may not reverse in full,” Mr Wargent said.
“We are getting increased levels of inquiry from buyers seeking to buy in peri-urban locations, away from the major city centres, but still within a reasonable travelling distance.
“These trends were already in evidence a few years ago, but the pandemic has accelerated them.”
Local economic impacts
Sydney’s COVID-19 lockdown restrictions have continued to extend. This has already had a marked impact on consumer confidence, although it hasn’t yet fed through to property market surveys on sentiment towards residential property.
The extensions of the New South Wales lockdown also locks in another negative quarter of GDP growth for the Australian economy, reversing much of the improvement seen earlier this year, including for the tight labour market.
Tight employment markets for skilled workers, who demand flexible working arrangements, are likely to see a hybrid model of working in the office only part of the time, persisting beyond the end of the pandemic.
Housing landscape shifts – lower demand for rental apartments
RiskWise Property Research Chief Executive Officer Doron Peleg said, “there is presently very little investor appetite for high-rise units, where rental markets have been particularly soft over the past year, especially in inner-city Melbourne.”
“This is reflected in a material reduction of dwelling approvals for units of four storeys or above,” he said.
“While sentiment has improved from last year’s nadir in Sydney and south-east Queensland, there has been no such recovery in Melbourne, and overall approval levels are running far below their previous market peaks of several years ago” Mr Peleg said.
“Net overseas migration expected to remain very low all the way at least until the second quarter of 2022.
“Therefore, we believe that investors should be wary of markets with a high volume of supply in the pipeline, as recently covered in our oversupply risk report.”
Mr Wargent added that inner-city Melbourne was the most obvious example of this issue.
“There are many vacant units. But there are some other pockets of oversupply risk which are best to be avoided,” he said.
Internal migration and demand for lifestyle areas
The Australian population has spread further out over the past year, a trend accelerated by the increased ability – and in certain cases necessity – to work from home.
Mr Peleg said coastal markets have seen success in current market conditions and “numerous inland tree-change markets have also fared very well indeed.”
“The top performing markets over the past year were Byron Bay and Sunshine Beach, but it’s worth noting that markets such as Orange and Mittagong in New South Wales have been exceptionally tight, and Buderim on the Sunshine Coast is another top-performing inland market,” he said.
Mr Wargent said South-East Queensland has been a particularly popular choice with their clients, from the Sunshine Coast to the Gold Coast.
“Interstate migration is now running at the highest levels since the post-Olympics period and the early parts of the mining boom some 15 years ago,” he said.
“Many of our clients want to buy in regional areas at the moment, generally close to the capital cities, such as Cessnock in New South Wales or Southport in Queensland.”
Reopening in 2022
Mr Wargent tipped international borders would reopen in 2022.
“We expect office occupancy to pick up again, and the capital cities will reassert themselves as the destinations of choice for new migrants,” he said.
“However, the trend towards more flexible work arrangements is unlikely to be reversed in full, and therefore there will be something of a hybrid model going forward, with more office workers likely to work only two or three days per week in the office, rather than the traditional five, for example.”