Four years after the World Health Organisation declared COVID-19 a global pandemic, the housing market continues to reflect the profound impact of the crisis. CoreLogic's research director, Tim Lawless, has identified 7 key ways in which COVID-19 has reshaped housing trends.

COVID 19 and housing market

Surging Housing Values: Since March 2020, Australia's national Home Value Index has surged by 32.5%, adding approximately $188,000 to the median value of Australian dwellings. Despite this growth, the market has experienced distinct cycles influenced by policy changes, interest rates, and demographic shifts.

Tightening Rental Markets: Vacancy rates have remained around 1%, leading to significant rental growth. Nationally, rents have increased by 32.4% since March 2020, adding approximately $150 per week to the median dwelling rent.

Impact of Monetary Policy: Monetary policy has played a pivotal role in stimulating housing demand, but also in temporarily dampening activity as interest rates rose from mid-2022. Despite speculation about a 'fixed rate cliff,' borrowers have managed higher mortgage rates well, with mortgage arrears holding below pre-pandemic levels.

Inflation Surge: Peacetime fiscal stimulus, low interest rates, and global supply chain disruptions, exacerbated by the war in Ukraine, have led to a surge in inflation. This has raised speculation about potential rate cuts later this year.

Labor Market Dynamics: Labor markets tightened significantly after the easing of lockdowns and social distancing measures. While labor markets are now loosening, the Reserve Bank of Australia forecasts the unemployment rate to remain below 4.5% until at least mid-2026.

Demographic Shifts: Despite closed borders, housing demand remained strong during the pandemic, driven in part by a decrease in household size. Internal migration favored regional markets, but has since normalised, while open international borders led to record-high overseas migration.

Supply Challenges: Despite high demand, a supply response has not materialised. Dwelling completions have remained relatively flat during the pandemic, with supply chain constraints, materials and labor shortages, and surging construction costs creating challenges for new housing supply.

Donie Collins

DMC Property Advisory