The Effect of Pandemic Lockdowns on the Aussie Housing Market
The threat of the COVID-19 Delta variant is currently spreading in Australia. As of today, Greater Sydney is about to undergo a 3rd week of lockdown. With the low vaccination rate, these lockdowns may still be the norm for the rest of 2021. CoreLogic provided a comprehensive analysis of the effect of pandemic lockdowns on the housing market. This gives proper insight for those who are planning to invest in properties during this uncertain time.
Lockdowns Affect the Housing Market in Several Ways
CoreLogic’s report explored the trends in the main elements of the housing market during the lockdown.
- Auction results
The majority of the auction outcomes improved through the lockdown. This was observed across Melbourne and Sydney results because most of the auctions in 2020 occurred in these areas.
In Melbourne, auction volumes were exhausted towards the end of Stage 4 restrictions (September to October 2020). Properties were difficult to sell because of limited on-site auctions and physical home inspections.
- Transaction activity
Transaction activity is significantly more volatile than sales values during the lockdowns. As a result, the volume of sales decreased by -33.9% nationwide during the Stage 2 restriction.
The significant decline in sales was not entirely due to the properties becoming harder to purchase. The primary economic shock brought by the lockdowns reduced price growth expectations. There was also pessimism towards real estate performance.
Usually, a lower demand will push vendors to offer discounts and slash property prices. Unfortunately, the new advertised supply also decreased. New listings went down by -44.7% in April 2020. Homeowners acknowledge that lockdowns are not the best time to sell.
- Property values
It was interesting to note that the property values had relative stability during the pandemic. During 2020, the decline in peak-to-trough was just -2.1% on a national level. A recovery trend was only seen starting October 2020.
The effect of the pandemic is more evident across capital cities:
- The economic conditions of Melbourne weakened during the extended lockdowns. The peak-to-trough decline was -5.6%. The market already recovered as a whole. However, there are still some small areas where the rent values are still much lower than pre-pandemic levels.
- The dwelling values in smaller capital cities were seemingly unscathed by the pandemic. For instance, Canberra didn’t have any decline in dwelling value. This is because of low number of COVID cases and the tight labour market.
Government and Institutional Response Helped in Stability of Property Values
The government’s pandemic response largely contributed to the housing market’s resilience. Fast economic recovery was made possible by several programs like:
- JobKeeper – employment relationships were maintained, which made it possible for people to go back to work.
- Mortgage payment deferrals – served as the main factor in decreasing new listings in the market.
- Small business support package – to help small businesses stay afloat.
- Payment breaks – granted by banks to those who can prove hardship during the Sydney lockdown.
Without the tremendous support of the government and institutions, the fate of the housing market becomes uncertain. Results may be detrimental if another lockdown is imposed without their support.
Buying a Home Remains Ideal Despite the Threat of the Covid-19 Delta Variant
Australian property values stayed resilient despite the lockdowns. As such, there is also strong growth observed as the social distancing restrictions ease up. Buying a home remains ideal despite the delta variant.
You can still pursue your dream of getting your dream home without putting yourself at risk. Shop around and research prices with just a few clicks. Makes Cents, a comparison website, will help you look for the best home loans in your area. Try out our comparison tool today!