Why Property Prices are Rising During Lockdowns - August 2021
By Guest Blogger, Terry Ryder, founder,
hotspotting.com.au and propertyU
Eighteen months of pandemic restrictions have shown us that Australian property markets are not only resilient but downright defiant.
Markets have shrugged off the negative impacts of multiple lockdowns to record busy sales activity and big price growth.
Buyer demand, if anything, has been enhanced by the pandemic and supply continues to be inadequate to meet demand, so prices are rising.
The many factors driving this property boom include the image of residential real estate as a safe haven in difficult times. At a time of considerable uncertainty and fear, Australians are seeking the reassurance provided by bricks and mortar.
The pandemic has also unleashed a high level of government stimulus measures, at both state and federal levels, and that is boosting buyer demand.
Lockdowns and closed borders have prevented Australians from travelling and spending in a normal manner, creating savings that have been ploughed into real estate. More time at home how provided “thinking time” and many people have reassessed their lives and made decisions to relocate.
That has exacerbated the Exodus to Affordable Lifestyle trend which was well underway pre-Covid but has been enhanced by it, providing more people with an awareness of the work-from-home possibilities. That has meant more people are selling and buying elsewhere.
Ex-pat Australians living in Covid hotspots overseas have retreated to the relative safety of Australia, further driving real estate demand.
Many businesses have thrived amid the pandemic and that has helped to turbocharge top-end markets in Sydney and Melbourne.
There’s no doubt the lockdowns in our major cities have generated inconvenience for the property industry but service providers and consumers have adapted to the changed circumstances.
Technology has allowed the industry to function during times when people have been restricted in their movements.
Online auctions have worked pretty well and clearance rates have remained well above 70% on weekends when major cities have been in lockdown. Lenders have adapted by conducting home loan interviews via technology.
The cumulative impact of all those factors has meant real estate has thrived.
Melbourne has experienced multiple major lockdowns since early in 2020 but, after an initial minor decline in median prices, has charged back and has delivered significant price growth.
As Australian Property Investor reported in a July headline: “Melbourne locks down but property still rises”. In the article Perron King, director of valuation firm Herron Todd White, commented that most people are spending more time at home than ever before and many households have taken the opportunity to upgrade their homes.
CoreLogic noted in a July press release that auction results in Sydney and Melbourne have remained resilient in lockdown.
“Transaction activity slows markedly through lockdown periods, however a ‘catch up’ in home purchases has been evident as restrictions ease,” the report said.
“Property values have remained resilient through lockdowns and have seen strong growth as social distancing restrictions eased.
“Stability of housing market values is likely subject to extensive government stimulus and institutional support for the sector.”
The Financial Review reported in late July – under the headline “Even in lockdown Sydney and Melbourne homes keep selling” that “property trading remains buoyant as the country’s two largest cities posted clearance rates indicating three-quarters of home auctions were successful, even as lockdowns curbed the number of transactions taking place”.
Top four accounting firm KPMG recently published a research analysis that found that dwelling prices were rising because of the pandemic, not despite the pandemic.
It found that Sydney price growth achieved in the past 12 months was double what it would have been without the pandemic. It claimed Brisbane price growth was 150% higher than it would have been without Covid-19.
KPMG said policy responses to the pandemic from government and from industry regulators had been instrumental in driving prices higher than normal.
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