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Year 2: How COVID changed the Australian property market game

By Zarah Mae Torrazo
18 March 2022 | 14 minute read
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As the two-year milestone of the pandemic approaches, an expert counted off the ways the Australian housing market has been impacted by the major public health event.

Two years ago, in March 2020, Australia first joined the not-so-coveted COVID club. 

And according to CoreLogic’s head of research Eliza Owen, the emergence of the pandemic on Australian shores has set off  “remarkable shifts” in the country’s housing market. 


“From the temporary shutdown of cities to an unprecedented monetary policy strategy, a new-found popularity of regional and low-density housing preferences and the introduction of various government home-buying incentives, the COVID-period has had distinct impacts on the composition of buyers and the dynamics of the housing market,” she explained. 

With Australia on year two with the pandemic, CoreLogic enumerated the six ways COVID-19 shaped the Australian housing market: 

1. Home values hit record highs 

Despite an initial decline in dwelling values at the start of the pandemic, CoreLogic reported that housing values rose 24.6 per cent between the end of March 2020 and February 2022. 

Ms Owen stated that low-interest rates, high household savings, government grants and a sharp reduction in the supply of housing underpinned the unprecedented growth during the period. 

By February 2022, CoreLogic estimated the total value of residential real estate to be $9.8 trillion, up from $7.2 trillion at the start of the pandemic. Meanwhile, the national median dwelling value rose by $173,805 to $728,034.

2. First home buyer activity surged 

Ms Owen noted that first home buyers were a sizable part of housing demand at the start of the pandemic.

“From June 2020, first home buyer activity surged amid the introduction of the HomeBuilder scheme, used alongside the First Home Loan Deposit Scheme, as well as other state-based grants and stamp duty concessions for first homebuyers,” she explained. 

These incentives, along with other growth drivers, have resulted in a spike in first home buyer activity, which peaked in January 2021, according to the expert. 

As of January 2022, loans to first home buyers numbered 10,964, significantly higher than the 10-year average of 8,682.

3. Rents hit new highs while gross yields skidded to record lows 

The expert also highlighted that the CoreLogic Rent Value Index, which tracks changes in rental valuations over time, has also surged to new record highs during the COVID period. 

While rents saw a mild decline of -0.8 per cent between March and August 2020, Ms Owen pointed out that there was a swift recovery in these values, followed by a surge through 2021.

Over the course of 2021, annual rent value growth was at its highest levels since 2008. Nationally, the median advertised rents since March 2020 have increased $30 per week to $470 per week. 

She mainly attributed the surge in rents due to rental supply constraints. She also emphasised that there is a clear diversity of rental conditions.

“Through the pandemic, there has been a clear shift in rental preferences towards 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,” Ms Owen said. 

Meanwhile, gross rental yields have fallen from 3.8 per cent in March 2020 to a record low 3.21 per cent as of February 2022. 

Ms Owen said this is because gross rental yields are a portion of the purchase price of a property. “Purchase prices of properties have grown 24.6 per cent since March 2020, outpacing the 11.8 per cent rise in rents,” she explained. 

4. Housing debt levels hit record highs

According to Ms Owen, the rapid growth in housing and rent values in the past two years was mainly caused by the sizable reduction in the official cash rate. 

“With the [Reserve Bank of Australia] setting the official cash rate target at 0.1 per cent since November 2020, lower debt costs enabled borrowers to access more credit,” she explained.

As of January 2022, total outstanding housing credit sat at a record high of over $2 trillion, according to the RBA. 

Data further showed that the ratio of housing debt to household income was at a record high 140.5 per cent through the third quarter of 2021, up from 139.2 per cent in March 2020. 

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

5. Record-high gap between house and unit values 

Ms Owen identified two factors that have contributed to a record difference between the two sector’s values: the buyer pool and the impacts of COVID.

The expert said: “Investors, who may have a preference for units, have been a relatively small part of demand through the upswing. Additionally, detached houses may have been in higher demand as Australians spent more time at home through the pandemic.” 

She added that government policies such as the HomeBuilder grant may have also contributed to increased detached housing demand, due to tight construction timelines to qualify. 

The culmination of these factors, according to Ms Owen, is the cause of the record difference between average house and unit values. 

Data from CoreLogic showed that the median house value was at a record high 29.8 per cent above the median unit value, indicating dollar value premium of around $182,000. 

This is up from just 8.5 per cent in March 2020, or a dollar value premium of around $44,000 for houses. 

6. The rise of the regions

According to Ms Owen, migration trends over the last two years showed an exodus of people from cities to regions outside the lockdown period. Meanwhile, there was a decline in the number of people leaving regions for cities. 

“The result has been higher than normal housing demand against unusually low levels of listings across regional Australia, in both the sales and rental market,” the expert commented. 

Data showed growth across regional dwelling values has been almost 40 per cent since March 2020, while capital city home values have increased around 21 per cent. 

Additionally, this trend has also led to the rise of popularity of lifestyle regions, with new million-dollar markets being created across areas such as the Sunshine Coast, the Illawarra and the Gold Coast. 

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