What a difference a virus makes!

It is four years since the WHO declared COVID-19 a worldwide pandemic.  

With lockdowns, social distancing, PPE and a widespread vaccination program initiated, where has that left the housing market?

The COVID-19 era seems way behind us now and in terms of restrictions, proof of vaccination, face masks, QR codes etc., it is. However, the hangover from all those measures that were put into place to limit the spread of infection has only just begun.

So let’s examine some of the housing trends that emerged during that time and where they have left us.

• Housing values have surged since the onset of COVID whilst experiencing distinct fluctuations due to changes in policy, interest rates and demographic shifts from then to now. The rollercoaster ride began when the pandemic was first announced and there was an immediate fall in housing values. By April 2022 they were around 30% higher but when the first interest rate rise was announced in May of that year the market reacted spontaneously with an accompanying 7.5% fall in prices. As stock levels plummeted and borders reopened to immigration, a new growth cycle commenced in February 2023, rising 9.5% through to the end of February this year.

• 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.

• A record portion of borrowers took advantage of fixed mortgage rates when they were at their record low and the maturing of these fixed terms fuelled speculation of an impending ‘mortgage cliff’.  However, mortgage arrears figures reveal that borrowers have so far handled the increased repayments but what they don’t tell you is how much stress they are under to meet those repayments. As savings dry up, these figures could start to paint a very different picture.

• With many business sectors prohibited to trade, the government introduced stimulus payments to both businesses and individuals to keep the economy afloat. Coupled with low interest rates and supply chain interruptions due to the war in Ukraine, inflation surged. We have recently seen that starting to turn and there is widespread speculation that we could see rate cuts later this year.

• Demographic shifts played a major part in housing values. Occupants of shared dwellings either moved to the family home or sought a place for just themselves. Working and schooling from home drove families and households to relocate to larger premises, with a lot migrating out of the city to regional areas. This saw values in coastal towns and hinterlands soar as demand increased, although this has since normalised. However, housing demand remained strong through the pandemic and the reopening of international borders has seen overseas migration spike to record highs.

• Despite unprecedented housing demand, we are yet to see a unified response from government and the construction sector on an effective plan moving forward. Supply chain constraints, materials and labour shortages, and a surge in construction costs have remained a challenge throughout the pandemic to date. There has been muted development since then with little uplift in supply.

With demand totally outstripping supply - with more people looking for fewer dwellings - it looks like the only way is up for housing values.