The numbers are in

It’s no secret that property prices have been rising throughout the COVID-19 pandemic, despite lockdowns.

But do you know by how much?

It has been clear that over the past 12 months housing supply has fallen short of the demand. Sellers have been concerned about listing their property during lockdown, fearing little interest and engagement from buyers. This, along with the ongoing health risks presented by the virus, has seen listing numbers plummet compared to the usual average.

So why have property values increased so counterintuitively?

Essentially, buyers have not exercised restraint to the same degree that sellers have. Demand outstrips supply and although the rate of increase in values has slowed since March, it still surges on. Australian housing values rose 15.8% over the first eight months of the year and 18.4% above levels a year ago. In comparison, Australian wages are rising at the average annual rate of 1.7%, around eleven times slower than growing house prices.

Sydney has been in lockdown for over two months now. Many have either lost their jobs or have been stood down. Businesses, particularly in the hospitality, tourism and entertainment sectors, are struggling to stay afloat – if they have managed to thus far. And yet the adverse economic effects of this has not thrown us into recession, according to the latest ABS data, nor seen the market crash that was forecast last year.

Lockdowns have contributed to a withdrawal by sellers from the property market, while at the same time has fuelled activity by buyers to improve their domestic circumstances. This, along with low and competitive interest rates, and a confidence that the lockdown won’t last forever, has spurred buyers’ enthusiasm to transact.

As the rate of growth of housing prices has slowed, it is widely thought that affordability is having a greater effect on the slowdown than the economically stifling effect of the lockdown. As affordability becomes a more defining factor for buyers and sellers return to market post-lockdown, we will see the market slow down even more.

As I have reported for the past few months, demand for property has been outstripping supply which has helped create upward pressure on prices. What the delta variant of COVID-19 has done is introduce a more volatile form of the virus which leads to more unpredictability with the future of lockdowns. In other words, the market may react differently to short, sharp lockdowns than prolonged ones and there is no precedent to refer to for that.

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Published September 7, 2021

By Belinda Cassano