COVID slaps an extra $125,000 on home prices

International consulting and accounting firm KPMG has released a study predicting the effect of the pandemic on house prices in Australia.

The firm, which predicted a 2021 housing boom back in early 2019, said the pandemic would likely cause Sydney properties to be worth 11% more by 2023 than they would have been if COVID hadn’t occurred. That would equate to an extra $125,000 for the average house, according to the report.

KPMG forecast a similar percentage hike in Brisbane, with house prices likely to be worth an extra $60,000. Melbourne properties were predicted to be worth an extra 4%, bringing the average home price up by $30,000.

The COVID effect - how much more a house will cost because of the pandemic (2023)

Sydney                  $125,000            
Canberra              $67,000
Brisbane               $60,000
Hobart                  $50,000
Darwin                  $46,000
Adelaide               $39,000
Melbourne          $35,000
Perth                     $17,000

KPMG’s ‘Covid price premium’

% increase due to Covid by 2023

Sydney                  11%
Brisbane               10%
Canberra              10%
Darwin                  8%
Hobart                  8%
Adelaide               7%
Melbourne          4%
Perth                     3%         

But how does KPMG put this price premium at COVID’s door? According to the accounting giants, it all comes down to the pandemic-fueled bank rate cuts. The RBA cash rate of 0.75% plummeted to just 0.1% during the pandemic, while historically low fixed mortgage rates of less than 2% have proven to be the perfect foil to plummeting immigration numbers. Add that to the momentum provided by the huge wave of FOMO driving buyer demand, and Australia’s favourite past-time of property speculation is alive and well – even in the midst of a global pandemic.