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Three years on from the pandemic: is the housing market going ‘back to normal’?

Posted by Nathan McCullum on 13/03/2023

CoreLogic has released a new report unpacking how the housing market has evolved in the three years since COVID was declared a global pandemic.

It’s been three years since the World Health Organisation declared COVID-19 a global pandemic, and Australian housing market performance has shown extraordinary, record-breaking figures. Some metrics are heading toward pre-pandemic norms, while other parts of the housing market have seen lasting changes.

Here is a summary of the main points, and the full report can be downloaded here or via the download button below.

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 largest and 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 very ‘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. This is much 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 value level.

3. Regional values are generally high, but migration may be reverting to pre-pandemic trends

Across 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 flows 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 by the pandemic.

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.

Source Corelogic.

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