Coronavirus: Australian Property Market Collapse Amid Covid-19
When coronavirus first gripped Australia back in March 2020, the country experienced relatively low rates of infections compared to the UK and the remainder of Europe. When COVID-19 cases in Australia reached their peak throughout August, daily cases reached a high of 751 before tailing off in September.
Whilst cases’ down under’ may not have been as severe as other parts of the world, economists predicted that the Australian property market would collapse at the hands of the coronavirus pandemic. With viewings unable to occur, rising unemployment and demand coming to a standstill, economists feared that Australia’s property prices could experience up to a 20% decline back in March 2020.
Although the Australian property market outlook was bleak and saw immense signs of struggle last year, 2021 has seen a significant comeback for Australian property. Take a look as we examine the journey of the Australian property market over the past year.
What happened to the Australian property market in 2020?
As Australia’s coronavirus situation became more serious, potential property buyers were forced to abandon viewings and auctions as social distancing restrictions were introduced. Whilst a 20% decline in Australian property prices was a worst-case scenario, the most optimistic forecast was a price drop of 5%.
Australia’s economic outlook grew increasingly bleak as the Federal Government predicted a 10% rise in unemployment figures, fearing this would spark a negative loop where housing would become completely unaffordable and overwhelm the system.
Whilst property prices in Australia did experience a decline, it was nowhere near the scale that economists had predicted. May – September 2020 saw a fall in house prices across the country before soon showing signs of recovery in Q3.
Melbourne experienced the most significant declines as a result of extended lockdown restrictions. CoreLogic data indicates that Melbourne property prices peaked during December 2019, with median house prices standing at AUD 712,000. During the height of the coronavirus pandemic, house prices in Melbourne declined by 8% to AUD 648,875. However, the beginning of 2021 saw prices bounce back to AUD 708,000.
Sydney also saw a significant dip in property prices during this period, with average prices standing at AUD 889,992 in May, then falling to AUD 859,943 in September. At the beginning of 2021, Sydney’s average property prices recovered to AUD 895,933 and economists forecast that houses in the area could see a further 10% rise this year.
How did Australia’s property prices recover in 2021?
It seems surprising how Australia’s property forecast swung from one extreme to the other in such a short space of time. However, there are multiple reasons for Australia’s strong property comeback.
Perhaps the most significant reason for Australia’s swift economic recovery was the country’s ability to take immediate action in imposing coronavirus restrictions. Both Australia and New Zealand introduced lockdown restrictions during the early days of the coronavirus pandemic, which helped curb infections rates. As mentioned previously, Australia did not see the high numbers of cases that were experienced across Europe. On 1st January 2021, new COVID-19 cases in Australia were 19 compared to 52,285 in the UK during the same day. As Australia’s coronavirus situation improved into Q3 of 2020, the economy was able to reopen sooner and allow for a faster recovery than many of its peers.
Another supporting factor for the recovery of Australia’s property prices was the Reserve Bank of Australia’s (RBA) decision to lower interest rates both before and during the coronavirus pandemic. The purpose of slashing interest rates was to boost economic growth in general, rather than property prices specifically. However, the decision resulted in historically low interest rates, which allowed the people of Australia to secure higher loans and made properties more affordable.
Multiple policies introduced by the Australian Government also helped provide support for first-time buyers, including the First Home Loan Deposit Scheme (FHLDS) and the Homebuilder Grant. The First Home Loan Deposit Scheme allows eligible buyers to purchase a home with a deposit of as little as 5%. The Homebuilder Grant allowed eligible Australian citizens to receive up to AUD 25,000 in 2020 and AUD 15,000 in 2021 when building a new home or making a significant renovation.
Over the years, Australian lenders have also become more flexible when approving home loans, making it easier to buy a house than back in 2018. The Australian Government is also looking to further simplify lending rules which could make it even easier for Australian citizens to buy a house in the future.
What is the current state of Australia’s property market?
2021 has seen Australia’s strongest property price growth in nearly five years, with the average house price in Australia standing at AUD 720,000. Data from the Australian Bureau of Statistics (ABS) revealed that property prices grew in every Australian capital city in December 2020, despite the dismal outlook during the start of the year.
In addition to the previously mentioned growth seen in Melbourne and Sydney this year, significant price increases have also been seen in Brisbane (2.7%), Perth (2.9%), Adelaide (2.6 %), Canberra (3.4%), Hobart (3.1%) and Darwin (2.2 %).
Michelle Marquardt, ABS head of prices statistics, stated that Australia’s property prices grew 3.6% last year and that the growth seen across all capital cities is something that has not been experienced since 2014.
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