While the Covid-19 pandemic shut down
life as we knew it, many businesses closed and economies tanked, there was one
market that flourished – our housing market.
The pandemic years of 2020-21 saw a
once-in-a-generation property boom driven by historically low-interest rates,
pent-up demand, and a flurry of government incentives.
In particular, 2021 was an
extraordinary year for Australia’s housing market - around 98% of locations
around the country recorded an increase in the median property value, with many
of those values surging by more than 20%.
Data from the Australian Bureau of
Statistics (ABS) confirms that the total value of Australia’s 10.8
million property portfolio skyrocketed to $9.9 trillion in 2021 alone, having
risen by a wallet-busting $512.6 billion in just 3 months.
These are some large numbers.
At the same time, the collective wealth
of Australia’s homeowners increased by $2 trillion in just one year alone - a
sum which is 30% higher than the annual output of the entire Australian
economy.
It’s difficult, therefore, to underestimate
the extent to which housing wealth has risen during the pandemic years.
And a few emerging sentiment shifts
also put pressure on prices.
We saw the pandemic cause Australians
to re-evaluate what they want from their home.
The home was no longer just a place to
rest; it fast became a place to work, play, and even self-isolate for a
period of time.
As a result, many buyers were looking
for larger homes with more space… and were even prepared to move out, even to
the regions, to get it.
In fact, it was a cycle of property
upgrades.
Some tenants upgraded to become first
home buyers; many millennials moved out of apartments and upgraded to homes as
they started to consider forming families and other Aussies upgraded their
homes for more space or to live in the right neighborhood.
At the same time, many Baby Boomers
upgraded their lifestyle looking for high-quality, low-maintenance living,
knowing this will likely be their last home while others bought themselves a
holiday home.
And the resultant significant rise in
housing prices means most existing homeowners are sitting on substantial
equity.
But this was a very short property
cycle.
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Jason Gwerder
Thursday, 21 July 2022
