The pandemic property market

The property market has not been exempt from global changes that the COVID pandemic has caused.  The two years since the pandemic have been tumultuous, but also lucrative for investors and the industry as a whole. Key points from a recent CoreLogic report provides a snapshot of the effects of the pandemic within the marketplace.

Whether it was the economic and employment-based effects of city and state lockdowns, the introduction of government home-buying and building incentives and the increasing popularity of regional living and low-density housing, the era of COVID has left its legacy on the composition of buyers and dynamics of the housing market.

Home values eclipse previous records, rising by 25 per cent

Despite an initial dip for the property market during the pandemic, housing values rose 24.6 per cent between the end of March 2020 and February 2022.

Cumulative change evidenced in the CoreLogic Home Value Index since the onset of COVID-19 shows a relatively small decline at the onset of COVID-19. For example, sales and listings volumes are far more affected than prices.

Home values declined -2.1 per cent between April 2020 and September 2020, before soaring amid low-interest rates, high household savings, government grants and a sharp reduction in the supply of housing.

By February 2022, CoreLogic estimated the total value of the residential real estate to be $9.8 trillion, up from $7.2 trillion at the onset of the pandemic. This is a significant change for the property market.

Rents rose 11.8 per cent to record highs while gross yields fell to record lows

Annual rent value growth throughout 2021 was at its highest level since 2008.  Median advertised rents in Australia have increased from $30 per week to $470 per week. In New Zealand, that figure is closer to $530 for a four-bedroom home.

For investors who have recently purchased long-term rental accommodation, rents may have increased due to higher purchasing prices.

Through the pandemic, there has been a clear shift in rental preferences toward 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.

Housing debt levels scale new heights

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 per cent since March 2020, outpacing the 11.8 per cent rise in rents.

As housing growth has started to slow, record-low gross rent yields appear to have begun stabilising.

Although total outstanding credit reached over $2 trillion in January, data shows monthly new finance borrowed for the purchase of property continued to hit fresh record highs through January 2022, at $33.7 billion.

High levels of housing debt, particularly where it has grown faster than incomes, create vulnerability in the economy. However, it is important to frame debt levels in the context of high asset values and relatively low-interest costs.

Official data shows housing interest payments to income have fallen to their lowest levels since 1999 — and household debt has trended lower as a portion of housing values. CoreLogic prides itself on the most accurate real estate data in Australia.

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