Over the past 15 months, Australia has seen a number of national, state and city lockdowns, with Greater Sydney and some of South-East Queensland being the latest to suffer the effects.

In spite of all the uncertainty, a new CoreLogic report has shown that the Australian housing market is certainly persevering.

In fact, CoreLogic has uncovered four key elements to lockdown-related housing activity which it believes could help inform expectations for the coming weeks — especially given the likelihood that Sydney will spend an extended period heavily restricted.

Looking to the Sydney housing market in particular, CoreLogic noted a successful result for as many as 74.6 per cent of scheduled auctions in the two weeks ended 4 July 2021 — only slightly lower than the previous five-year average of 77.2 per cent — and denoting a positive trend, CoreLogic’s Eliza Owen said.

Moreover, the head of research believes there is a strong correlation between rising housing market values and lockdowns, noting that despite several localised lockdowns in the first half of 2021, values surged by 12.2 per cent on a national level.

She explained: “It is true that demand takes a hit during lockdowns. There was a lot of uncertainty amid stage 2 restrictions nationally last year, and sentiment for housing market outcomes plummeted.

“But supply also declined, because sellers and agents knew it may not be the best time to market property. That helped to balance out the overall effect on prices.”

Government and institutional offers of help also played a key role in market stability, she added.

“A big part of why the housing market didn’t see further value declines was the enormous income support packages provided to households,” Ms Owen opined.

“In the event of another extended lockdown, the future of housing demand and supply becomes much less certain if that same government and institutional support is not there.”

Ms Owen has detailed the four key elements impacting housing markets affected by lockdown, and how they could affect market movements in the coming weeks.

Auctions

Auction results have generally improved with each lockdown, particularly in Sydney and Melbourne, CoreLogic found.

While longer distancing periods saw lower auction volumes and a higher number of withdrawals, properties still transacted and in strong numbers. Across both Sydney and Melbourne, the portion of properties that have sold prior to auction is increasing with each lockdown, while properties sold following an auction trumped the historic average.

“Many real estate agents are now running both physical and online auction formats in parallel, making it easier for prospective buyers to participate in the auction event should restrictions be implemented. Buyers may also have become more adept with these formats,” she said.

“With agents finding ways to navigate the auction market amid social distancing restrictions, the clearance rate is more likely to reflect market sentiment than be directly impacted by a shorter-term lockdown.”

Demand and supply

Along with the lockdown-induced decline in demand, lockdowns bring with them a coinciding fall in advertised supply, CoreLogic has noted.

During the onset of stage 2 restrictions, between March and April 2020, sales volumes fell by 33.9 per cent across the country as properties became more difficult to purchase and positive price growth expectations were replaced with pessimism.

But instead of seeing greater vendor discounting and a fall in property prices, the market saw new advertised supply falling as home owners deemed lockdowns as a bad time to sell. As such, in April 2020, new listings added to the market declined by 44.7 per cent.

Ultimately, the lockdown periods generally resembled “holiday periods”, when both buyers and sellers step back from the market, according to Ms Owen.

And although listing levels have started to trend up, the current levels of new listings still do not match demand, Ms Owen said.

“Through 2021, as housing demand surged in recovery from COVID-19 lockdowns, CoreLogic has observed a greater volume of sales than new listings added to the market. This has resulted in an especially low level of total advertised stock,” the researcher noted.

Currently, total listing volumes across Australia sit at 139,897 — significantly lower than the previous five-year average of 201,442.

Catch-up sales

According to Ms Owen, one of the more extraordinary elements of housing market performance in recent months has been strong sales volumes.

Overall, the 2020–21 financial year saw approximately 582,900 transactions despite international borders remaining closed — higher than the decade average of 455,346 and the highest annual sales volume since February 2004.

According to Ms Owen, the post-lockdown period did not only see a resumption of sales activity, but also additional sales that would have otherwise transacted during lockdown periods.

She said: “It is reasonable to assume that for a sizeable financial and temporal commitment such as housing, a period of lockdown is unlikely to deter a housing purchase altogether, unless household income is severely affected.

“Additionally, consumers may have been more incentivised to purchase housing following the end of stage 2 restrictions, as the households saved 22 per cent of income through the June 2020 quarter (compared to a then decade average of 7 per cent), and a range of government incentives were introduced for the purchase or construction of new homes.”

Institutional responses

Property values have remained relatively stable throughout the COVID-19 pandemic. Nationally, values saw a peak-to-trough decline of just 2.1 per cent through 2020, before a recovery trend in October 2020.

“Across smaller capital cities, dwelling values were virtually untouched by the pandemic, if not further fuelled by low interest rate settings,” Ms Owen explained.

“With a tight labour market and low COVID-19 case numbers, Canberra did not see a single month of dwelling value decline amid lockdowns. Canberra has continued to hit a fresh record-high value every month since September 2019.”

According to the researcher, while there are many factors that could be seen as instigators of the property market’s swift recovery, including record-low mortgage rates, the “enormous levels” of government and institutional support might just be the most important.

“Many of the factors that saw resilience in the housing market can be tied back to the government and institutional response to the pandemic,” she said.

“The swift economic recovery was helped by programs like JobKeeper, which made it easier for people to return to work by maintaining employment relationships.

“Mortgage repayment deferrals were also likely a key factor in reducing new listings added to the market, which may have otherwise been fuelled by an inability to make mortgage payments.”

While a strong government response is arguably lacking during Sydney’s current lockdown, Ms Owen remains confident that the majority of home owners and potential home buyers across NSW will remain unaffected by the current restrictions in place across Greater Sydney.

However, she recognised that risks might still surface depending on how long the current lockdown actually lasts.

“Housing market conditions could be weaker amid an extended lockdown that does not see the same strong institutional response as was seen last year,” the researcher concluded.