By Guest Blogger, Andrew Bell, Chairman, Ray White Bell Group
Chairman | The Ray White Surfers Paradise Group
QLD Board Member | Real Estate Institute of Australia
We’ve now passed the five-year anniversary of the announcements of substantial restrictions for all Australians due to the COVID-19 pandemic. Through that time we’ve seen dramatic impacts on the real estate market. With stay-at-home orders, we all had to learn how to keep our jobs and run our businesses in completely different ways. A greater focus developed on the home itself. People started to question the type of properties they wanted to live in, given they were spending so much time at home. With varying degrees of restrictions across the country, those in heavily populated areas began looking to relocate to regions with fewer restrictions and risks. COVID simply put the spotlight on every aspect of the home and triggered a reevaluation of people’s needs and wants.
Contextually, one of the most significant changes has been the relocation of so many from dense, heavily populated areas into lifestyle locations. People wanted to move away and found a new appreciation for quality of life. It was not just about having a nice house, but about living in a desirable lifestyle location. This saw movement out of the big cities and into smaller cities like the Sunshine Coast and the Gold Coast, and for some, even smaller locations up and down the East Coast of Australia. That trend of valuing both property quality and lifestyle continues today, well past the end of the COVID restrictions.
The second major trend was the desire to either build or renovate. This has created a renovation boom and significant growth in the construction industry. Many homes were demolished to make way for new builds, a trend that has transformed suburbs across the country. For senior Australians, the reassessment of housing needs led to decisions to downsize from large houses into luxury apartments. This drove the largest construction of high-end apartments the country has ever seen.
All of these shifts accelerated the housing crisis. For example, many people who could afford to do so bought second properties. While keeping their original homes in Sydney, Melbourne, Adelaide and elsewhere, they also bought holiday apartments or houses in Queensland to use as a getaway and a place of refuge during the pandemic. This surge in demand increased buying pressure almost overnight.
At the same time, the pandemic exposed major skill shortages across many industries, including doctors, nurses, first responders, and most definitely construction workers. To address this, Australia needed to increase immigration to bring in skills or face significant economic setbacks. This, in turn, added further pressure to the rental crisis.
As a result, Australians have now witnessed the greatest real estate boom in the lifetime of anyone in the country. And this trend has not been unique to Australia, it has occurred worldwide. The greatest beneficiaries have been those in the strongest financial positions at the beginning of the pandemic. They had the freedom to buy second homes, to demolish and build new ones, or to downsize into luxury apartments. The luxury end of the market therefore saw the greatest demand and growth in transactions. Developers and builders responded by focusing on this top segment, which has performed the strongest and seen the greatest capital growth.
While much of the financial strength supporting this segment came from established wealth, research shows that the new driving force is “new money”, younger people who accumulated wealth quickly through e-commerce and technology businesses. Although the market is showing some signs of easing, the wave of activity at the top end remains strong.
The market that has suffered the most is affordable housing, where the majority of Australians live. Recent years have shown that suburbs adjoining blue-chip areas have become beneficiaries of growth, as buyers unable to afford premium suburbs still wanted access to the lifestyle they offer. This has forced them into nearby areas, transforming previously overlooked suburbs into highly sought-after ones.
The lifestyle factor has become a dominant driver in housing choices. Beyond the growth in beachside locations, there has also been a substantial rise in demand for hinterland properties. Many Australians are seeking acreage that allows them to remain close to the city while being far enough away to avoid crime and health risks often associated with urban areas. This trend toward lifestyle acreage is likely to continue growing.
The most common question I’m asked today is: “Where is the next growth area?” In my view, it will be the shoulders of the market that have seen strong activity over recent years. The areas that provide all the key ingredients buyers are looking for: proximity to transport, access to hospitals, schools and shopping, closeness to employment hubs, and reasonable proximity to lifestyle amenities like restaurants, cafes, beaches, and golf clubs - are the ones to watch.
As affluent suburbs expand outward, many areas that buyers would never have considered before are now seen as viable options. In these suburbs, older homes are being knocked down and replaced with new builds, which then accelerates demand and pushes prices even higher. For those willing to reconsider areas they may have once dismissed, these are the places where the greatest capital growth is likely to be found.
Andrew Bell OAM
Chairman | Ray White Bell Group
Board Member | Real Estate Institute of Australia
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