Four years later: How Covid changed housing trends

In the four years since the onset of Covid, the housing market has seen prices surge 32.5 per cent according to new analysis.

According to CoreLogic, median home prices are now $188,000 higher than they were in March 2020.

CoreLogic Research Director, Tim Lawless, said despite the upward trajectory, 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 per cent between March 2020 and June 2020 before surging 30.8 per cent higher, finding a cyclical high in April 2022,” Mr Lawless said.

“The market slumped 7.5 per cent 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 per cent through to the end of February this year.”

Prices are up 53.8 per cent in Perth over the past four years, followed by Adelaide (38.5 per cent), Brisbane (37 per cent) and Darwin (34.2 per cent).

At the same time, regional Australia has outpaced the capital cities, with values rising 35.2 per cent compared to 31.5 per cent for the city.

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.

Source: CoreLogic

Mr Lawless said rental markets had also tightened substantially, with vacancy rates holding around 1 per cent and rental growth surging thanks to record high levels of immigration.

“Nationally, rents have jumped 32.4 per cent since March 2020, adding approximately $150 per week to the median dwelling rent,” he said.

“Early in the pandemic house rents were rising substantially faster than unit rents, however this trend has reversed since international borders re-opened, with unit rents consistently outpacing house rents since early 2022. 

“Through the pandemic to date, national house rents have increased by 33.4 per cent and unit rents are up 30.4 per cent.”

Mr Lawless said interest rates and immigration were two of the key driving forces behind rising rents and property prices.

“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,” he said.

“Net overseas migration tends to have a more immediate flow-through to rental demand and a lagged flow-through to purchasing demand. 

“As net overseas migration slows, we should see rental conditions loosen, however with roughly 150,000 net permanent arrivals to Australia last year, we are likely to see a demand side legacy providing some upside for purchasing demand remain for several years at least.”

Mr Lawless said despite the initial jump in unemployment when lockdowns began, conditions quickly improved and have helped support borrowers.

“Although labour markets are loosening a little, RBA forecasts have the unemployment rate holding below 4.5 per cent through to at least mid-2026,” he said.

“Strong labour markets have been a key factor in keeping borrowers on track with their mortgage repayments in the face of high interest rates and cost of living pressures, with the 90-day mortgage arrears rate holding well below 1 per cent.”

According to Mr Lawless, despite increased demand for homes, supply hasn’t been unable to keep up.

“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,” he said.

He said with ongoing capacity constraints and margin pressures, the time it takes to build a new dwelling has blown out, moving from a pre-pandemic average of 2.2 quarters to deliver a completed house to 3.1 quarters, and larger increases for higher density dwellings. 

“Given the low number of completions to-date, it’s likely these figures will increase materially over the coming year,” he said.

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Rowan Crosby

Rowan Crosby is a senior journalist at Elite Agent specialising in finance and real estate.