The COVID-19 pandemic has had far-reaching effects on nearly every aspect of our lives, and the Australian property market has been no exception.
As the world locked down in early 2020, few could have predicted the significant and lasting transformations that would take place in the housing market. In just a few short years, we’ve seen everything from fluctuating property values to changing buyer behaviours and a shift in regional versus metropolitan market dynamics.
This article explores how COVID-19 has reshaped the Australian property market, focusing on key changes in property prices, rental demand, buyer preferences, government interventions, and the long-term implications for the housing sector.
Let’s Get Straight To The Point
COVID-19 profoundly impacted the Australian property market, causing significant property value and rental price fluctuations, shifting buyer preferences, and highlighting supply constraints.
Initially, property values dipped, but low interest rates and government support spurred a boom, with housing values increasing by 32.5% from March 2020 to February 2024. Rental demand surged, raising rents by 32.4%. Regional areas experienced explosive growth as remote work became popular, though metropolitan markets rebounded.
Government interventions, such as the HomeBuilder scheme and mortgage relief, supported the market but highlighted supply challenges due to labour shortages and rising costs. Long-term impacts include persistent affordability issues, high construction costs, and demographic shifts, which will continue shaping the market’s future.
Property Prices And Value
The Australian housing market saw dramatic fluctuations in property values during the pandemic. In early 2020, the market experienced a sharp downturn, followed by an unprecedented surge in house prices.
National housing values increased by 32.5% between March 2020 and February 2024. To put this into perspective, this growth added around $188,000 to the median value of an Australian dwelling.
The path to this surge wasn’t straightforward. In the initial months of the pandemic, from March to June 2020, the market experienced a slight dip of about 1.7%, largely due to the uncertainty surrounding the economic fallout of the pandemic.
However, as the pandemic dragged on, a range of factors — including historically low interest rates, government stimulus programs, and increased demand for housing — resulted in a sharp recovery and subsequent boom.
By April 2022, house prices had surged by 30.8%. The rise in prices wasn’t sustainable, and as interest rates began to climb in mid-2022, a correction occurred, with prices falling by approximately 7.5%.
Yet, the market has shown resilience, with a fresh growth cycle beginning in February 2023. The combination of stable demand and limited supply saw prices increase 9.5% through February 2024, underscoring the complexity and volatility of the post-COVID housing market.
Rental Market
Rental markets across Australia have experienced similarly significant changes since the onset of the pandemic. Rental prices have risen sharply, with the national median rent increasing by 32.4% between March 2020 and February 2024.
This means tenants now pay an average of $150 more per week in rent than before the pandemic. The growing need for additional space as individuals look to live in larger homes and a shortage of available stock are two reasons for the increased demand for rental properties.
Vacancy rates have tightened dramatically, with many cities and regions experiencing vacancy rates of around 1%. This has created an increasingly competitive rental market, particularly in major cities like Sydney, Melbourne, and Brisbane. It has also led to rising rent prices in suburban and regional areas that traditionally demand less.
Regional And Metropolitan Differences
During the pandemic, one of the most striking trends in the Australian property market has been the divergence between regional and metropolitan markets. While property prices in many major cities initially held steady, regional areas experienced explosive growth.
The work-from-home (WFH) phenomenon, which enabled people to move from urban areas to rural ones without losing their jobs, is largely responsible for this tendency. In regional Victoria, for example, house prices increased by 8.1% year-on-year, while regional New South Wales saw an 11% increase.
This boom in regional property markets was driven by factors including affordability relative to metropolitan areas and the increased desirability of larger homes with more outdoor space. However, the gap between regional and metropolitan markets narrowed as the initial migration wave to regional areas stabilised.
In recent times, metropolitan areas have shown stronger growth as workers return to offices and regional migration trends normalise. Despite this, regional areas maintain a competitive edge in affordability and lifestyle.
Buyer Behaviour And Preferences
The COVID-19 pandemic drastically altered what Australians look for in a property. The shift to remote work and the closure of office spaces led to an increased demand for homes with more space, particularly those with dedicated home offices or outdoor areas.
The preference for properties with larger floor plans, outdoor spaces, and a greater sense of privacy surged during this period. While city apartments were once the dream for many first-time buyers and investors, the pandemic saw many opting for homes in suburban and regional areas that offered a better quality of life.
The demand for properties with home offices, larger gardens, and proximity to outdoor spaces like parks or beaches spiked as people sought to make their homes more liveable during extended lockdowns.
As the market enters a new phase, there is growing evidence that many preferences will not change. The shift in buyer behaviour towards more spacious properties and regional areas will likely influence the market in the long term.
Government Interventions And Policy Impact
The Australian government implemented several initiatives throughout the pandemic to stimulate the housing market and support homeowners and renters. One of the most significant programs was the HomeBuilder scheme, launched in June 2020.
The initiative provided grants to homeowners and builders for new construction and renovation projects, stimulating demand in the housing sector and providing a much-needed boost to the economy. Additionally, the government introduced mortgage relief measures that allowed homeowners to defer repayments for up to six months.
At their peak, these measures helped more than 900,000 homeowners weather the storm of economic uncertainty, preventing a wave of mortgage defaults. During this time, the Reserve Bank of Australia (RBA) also significantly influenced the property market.
The RBA helped to boost house demand by lowering interest rates to historically low levels, which made borrowing money more accessible to Australians. However, as inflationary pressures grew, the RBA began raising interest rates in mid-2022, cooling down the housing market and putting downward pressure on property prices.
Supply And Construction
While demand for housing surged during the pandemic, the supply side of the equation remained constrained. Due to pandemic-related disruptions, the construction industry faced significant challenges, including labour shortages, supply chain issues, and rising material costs.
These factors and a limited housing supply in many areas created a perfect storm of underproduction. In response to the strong demand and the limitations on supply, construction costs soared.
The building industry struggled to meet the growing demand for housing, which ultimately led to longer project completion delays and higher prices for new builds. While stimulating demand, the government’s stimulus packages also contributed to the supply-side bottleneck, with many developers facing delays and increased costs.
Demographic Shifts
The pandemic also influenced Australia’s demographic trends and impacted housing demand. One of the most notable shifts was the decline in household sizes.
As more people moved out of cities or returned to their regional hometowns, the number of people living in each home shrank. This shift has placed additional pressure on housing stock, particularly in areas experiencing increased demand.
Furthermore, the reopening of international borders saw a surge in inward migration as Australians and overseas nationals returned to the country. This demographic influx further intensified the demand for both homeownership and rental properties.
Long-Term Implications
While COVID-19’s immediate impact on the Australian property market is clear, the long-term effects are still unfolding.
One of the market’s biggest challenges is the predicted lack of housing supply; with construction costs remaining high and a reduced risk appetite among developers, new housing stock is expected to remain constrained for the foreseeable future. This is particularly concerning given the growing population and increasing rental and owner-occupied housing demand.
The lack of housing supply will likely significantly affect homeownership and the rental market. The price of property could continue to rise, and renters may face even higher costs as demand outstrips available supply. This will likely result in greater affordability challenges, especially for younger Australians and first-time homebuyers.
Conclusion
The impact of COVID-19 on the Australian property market has been profound, driving significant shifts in property values, rental prices, buyer preferences, and supply dynamics.
While the market has shown resilience and recovery, the ongoing challenges related to housing supply and demographic changes suggest that these trends will continue to evolve in the coming years. As Australia adjusts to the post-pandemic landscape, the effects of COVID-19 will continue to shape the housing market.
Whether these changes represent a temporary blip or a lasting transformation will depend on various factors, including government policies, economic conditions, and the long-term trajectory of work-from-home arrangements. One thing is certain — the COVID-19 pandemic has fundamentally reshaped the Australian property market, and its effects will be felt for years.
Frequently Asked Questions
Did Property Prices In Australia Drop During Covid-19?
In the early stages of the pandemic, some areas experienced slight price drops due to reduced demand. However, government stimulus packages, low interest rates, and increased demand for housing outside metropolitan areas quickly reversed this trend, with prices surging in many regions.
Did Rental Markets Experience Significant Changes During Covid-19?
Yes, rental markets in metropolitan areas, particularly in Sydney and Melbourne, faced high vacancy rates as international students and tourists disappeared. Conversely, regional rental markets tightened due to increased demand.
Are Regional Areas Still Popular Post-Pandemic?
Yes, the pandemic sparked a trend of people moving to regional areas for more space and affordability. While some have returned to cities, regional areas remain attractive due to improved infrastructure and remote work options.
Did The Australian Property Market Recover After Covid-19?
The property market not only recovered but experienced significant growth post-pandemic. Low interest rates and increased savings during lockdowns drove strong demand for property purchases.
What Long-Term Effects Will Covid-19 Have On The Australian Property Market?
Long-term effects include a continued focus on lifestyle properties, hybrid work arrangements influencing housing preferences, and a greater emphasis on regional development. Additionally, the