New CoreLogic report reveals which housing metrics are returning pre-pandemic norms
Three years after the COVID-19 pandemic broke out, some housing metrics are heading towards pre-pandemic norms, while other parts of the housing market have seen lasting changes, according to a new CoreLogic report.
CoreLogic’s new report, Three years on from the pandemic: is the housing market going ‘back to normal’, authored by Eliza Owen (pictured above), CoreLogic head of research, unpacked how the Australian housing market has evolved since March 2020.
National housing values up from March 2020
Australian home values initially fell at the onset of the pandemic, slipping -1.9% between April and September of 2020 due to downward pressure from the initial uncertainty around the pandemic, lockdowns, and a sharp decline in economic activity.
This was followed by the sharpest upswing in home values on record between September 2020 and April 2022, with national dwelling values surging 28.6%, as an enormous three-pronged monetary policy expansion and stimulus payments of around $120 billion helped turn around a sharp decline in economic activity, and shift sentiment to the housing market. Sales volumes spiked, peaking at 619,915 in the 2021 calendar year.
The rapid interest rate hikes converted this, however, to the largest and fastest downswing on record. National dwelling values fell -9.1% from April 2022 through the end of February, while annual sales volume dropped -21.5% from the peak in December. Despite the recent volatility, home values remain 14.8% 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,” Owen said. “It’s likely that once interest rate hikes are paused, the movement in sales volumes and home values may become less extreme.”
A very “mixed bag”
Across the capital cities, Adelaide has seen the highest cumulative change in housing values over the past three years. Adelaide home values now sit 43.7% higher than at the end of March 2020, which is equivalent to a $211,097 rise on the median house value across the city. In comparison, the equivalent median house value gain in Sydney is $119,830, while house values in Melbourne were down the equivalent of -$1,009 at the median house value level.
Regional values generally high
Dwelling values across the combined regional dwelling market remained 30.7% higher than they were at the onset of COVID-19, while values across the combined capitals were 10.4% higher.
Joint research from the CBA and RAI showed that net migration from capitals to regions remained 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,” Owen said.
Preference for houses over units easing
During the height of the lockdowns, purchase preferences appeared geared towards houses, likely due to a combination of investor activity being relatively low and home buyers wanting more space.
But towards the end of the HomeBuilder scheme in 2021, the portion of house purchases have trended lower and are currently back toward pre-COVID levels. The following year, the premium on national house values relative to units peaked. The median house in Australia hit 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, the CoreLogic report said.
Rental market significantly impacted by the pandemic
“The rental market has arguably sustained the most significant and lasting change from the pandemic,” Owen said.
Since the onset of the pandemic, rent values rose by 23.1%, which likely might have come as a shock for long-term renters, who saw an average growth in rent values of 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% in February, there is no indication of rents going backwards nationally,” Owen said.
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