It’s been three years since COVID-19 was declared a global pandemic, and Australian housing market performance has shown extraordinary, record-breaking figures. So, will it go back to ‘normal’ – and what would that look like?
Property data firm CoreLogic this week released a report unpacking how the housing market has evolved in the past three years and looking at what the future might hold.
The main findings show that some metrics are heading toward pre-pandemic norms, while other parts of the housing market have seen lasting changes. Here are the high points outlined in the report.
1. National housing values are 14.8% higher than where they were in March 2020
National dwelling values rose 28.6% from September 2020 to April 2022. But a rapid rise in interest rates soon converted this to the fastest downswing on record, with a 9.1% fall from April 2022 through to the end of February. Annual sales volumes are down 21.5% from a peak in December. Despite the recent volatility, home values remain 14.8% higher overall.
In recent weeks, the market has shown signs of stabilising at this higher level, but it may be too soon to call the bottom of the market amid ongoing interest rate rises. It’s likely that once interest rate hikes a paused, the movement in sales volumes and home values may become less extreme.
2. Australia’s housing market remains a ‘mixed bag’
In the past three years, Adelaide houses have come out on top across the capital cities, with values sitting 43.7% higher than at the end of March 2020. This is the equivalent of a $211,097 increase on the median house value across the city, stronger than the equivalent median house value gain in Sydney (which has risen the equivalent of $119,830), and Melbourne house values have actually seen a decline since March 2020, down the equivalent of $1,009 at the median house level.
3. Regional values are generally high, but migration may be reverting
In the combined regional dwelling market, values remain 30.7% higher in than at the onset of COVID-19, compared with values sitting 10.4% higher across the combined capitals.
While ABS migration data is only reported to March 2021, joint research from CBA and the RAI shows the ‘regional movers index’ declining from pandemic highs. According to the research, net migration from capitals to regions is still higher on average than pre-COVID levels, but has been trending down for the past two years.
While migration flow away from regional Australia may help to ease pressure on demand for some markets, it is clear that regional markets have retained the most value since the onset of the pandemic.
4. The preference for houses over units is easing
Through the height of lockdowns, purchase preferences seemed geared towards houses. This was likely a combination of investor activity being relatively low, and homebuyers wanting more space.
Toward the end of the HomeBuilder scheme in 2021, the portion of residential purchases that were houses have trended lower, and are currently back toward pre-COVID levels. In 2022, there was also a peak in the premium on national house values relative to units. The median house in Australia reached a record 32.9% above the median unit value. This has also since trended lower, with the median house value sitting 28.3% higher in February 2023.
5. The rental market has been rocked
The rental market has arguably sustained the most significant and lasting change from the pandemic. Cumulative growth in rent values since the onset of the pandemic nationally is 23.1%. This is likely to have come as a shock to long-term renters, where annual growth in rent values averaged just 2.1% nationally throughout the 2010s.
With net inflows of overseas migration expected to return to pre-pandemic levels this year, and a rental vacancy rate of just 1.0% in February, there is no indication of rents going backwards nationally.
The full report is available for download from the Corelogic website.
