6 ways Covid-19 has shaped the housing market, according to Eliza Owen of CoreLogic

Eliza Owen, Head of Residential Research Australia at CoreLogic, recently reported on the remarkable ways the Australian housing market reacted to Covid-19. Two years on, Owen outlines the six significant impacts of the pandemic on our housing market. 

Record high values

"Despite an initial dip, housing values rose 24.6% between the end of March 2020 and February 2022."

"National home values declined -2.1% between April 2020 and September 2020, before soaring amid low interest rates, high housing savings, government grants and a sharp reduction in the supply of housing." 

"By February 2022, CoreLogic estimated the total value of residential real estate to be $9.8 trillion, up from $7.2 trillion at the onset of the pandemic. The median Australian dwelling value increased $173,805, to $728,034." 

First home buyer activity spiked

"First home buyers were a sizable part of housing demand at the start of the pandemic. This cohort took advantage of more affordable housing options following the earlier downturn, along with record low mortgage rates and government incentives." 

"ABS data shows the number of new loans to first home buyers increasing during the housing market downswing from 2017 to 2019. From June 2020, first home buyer activity surged amid the introduction of the HomeBuilder scheme, used alongside the First Home Loan Deposit Scheme, as well as other state-based grants and stamp duty concessions for first home buyers." 

"As of January 2022, loans to first home buyers numbered 10,964, above the decade average of 8,682."

Rents increased while gross yields fell

"The CoreLogic Rent Value Index, which tracks changes in rental valuations over time, has also surged to new record highs."

"Over the course of 2021, annual rent value growth was at its highest levels since 2008. Across Australia, median advertised rents since March 2020 have increased $30 per week to $470 per week. The headline numbers hide the diversity of rental conditions. Through the pandemic, there has been a clear shift in rental preferences towards lower density housing options, where the upwards pressure on rents has been more substantial." 

"This trend has evolved over the past year, with rental affordability gradually deflecting more demand towards higher density rental options where the cost of renting is more affordable." 

"However, gross rental yields have declined. This is because gross rental yields are a portion of the purchase price of a property, and purchase prices of properties have grown 24.6% since March 2020, outpacing the 11.8% rise in rents."

"Nationally, gross rental yields have fallen from 3.8% at March 2020 to a record low 3.21% as of February 2022. As housing growth has started to slow, this record-low gross rent yield figure appears to have begun stabilising." 

Record high housing debt levels 

"Rapid increases in housing and rent values in the past two years was largely the result of a sizeable reduction in the official cash rate. With the RBA setting the official cash rate target at 0.1% since November 2020, lower debt costs enabled borrowers to access more credit." 

"As of January, total outstanding housing credit sat at a record high of over $2 trillion, according to the RBA, while the ratio of housing debt income was at a record high 140.5% through Q3 2021. This is up from 139.2% in March 2020." 

Record high gap between house and unit figures

"Both the composition of the buyer pool and the impacts of Covid may have contributed to a record gap between house and unit values."

"The result is a record high gap between house and unit values. The median house value across Australia was at a record high 29.8% above the median Australian unit value, with a dollar value premium of around $182,000. This is up from just 8.5% in March 2020, or a dollar value premium of around $44,000 for houses." 

The rise of the regions

"Migration trends over 2020 and 2021 revealed an uptick in the volume of people leaving cities for regions outside of lockdown periods, and a decline in people leaving regions for cities."

"In lifestyle regions, which have become intensely popular in the past two years, new million-dollar markets have been created across areas such as the Sunshine Coast, the Illawarra and the Gold Coast, where median house values now sit above the million-dollar mark."

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