Home Insights The five ways COVID-19 changed housing markets

The five ways COVID-19 changed housing markets

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The COVID-19 pandemic has had a profound impact on society. real estate market They have not escaped major adjustments.

different location settings and Property type It is changing very quickly and the housing market is still adjusting.

These changes go beyond price spikes. degree of interest And this year it started to turn around.

Thinking about the real estate market changes caused by the pandemic that are most likely to persist, and which are likely to reverse, provides insight into markets likely to outperform. increase.

How, where, what and why Australian housing preferences have changed dramatically.Photo: Getty

1. people chose to live with fewer people

One of the sharpest corrections in the real estate market occurred early in the pandemic when people moved into smaller households.

Amidst lockdowns and remote working and studying, more people have decided they need their own space.

One- or two-person households are more common in 2021 than they were in 2016, but larger households have taken a toll.

especially, Share houses have fallen significantly in popularity during CovidWith college studies going remote and many retail and hospitality businesses shutting down, shared living was less appealing.

Nationwide, the average household size fell from about 2.59 to 2.55. This may not seem like much, but it added significantly to total housing demand.

This meant that about 150,000 more properties were needed to house the population than otherwise.

That’s almost a year’s worth of housing construction. This is to accommodate the sudden reduction in household size.

Although early in the pandemic, this increase in housing demand was offset by a decline due to closed borders. However, immigration has now increased significantly, meaning that aggregate demand for housing is very strong, as evidenced by the very rapid rise in rental prices across the country.

2. Provinces (and smaller capitals) became prominent

Rural areas across the country are becoming more valuable as the potential for remote work and desire for lifestyle changes has pushed some people to move out of cities.

But this ‘regional renaissance’ has also benefited smaller capital cities with lower housing prices, such as Brisbane and Adelaide.

Prices are going up nationwide, but it’s interesting. Which regions have increased in value the most.

Comparing price growth to the average tells us which regions have outperformed during the pandemic.

The pandemic has had a significant positive impact on Victoria, New South Wales, South East Queensland and Tasmania.

They are the biggest winners of post-pandemic lifestyle change.

3. People want and are willing to pay for bigger homes

Another important change among homebuyers is the desire for larger homes.

With remote work on the rise and people spending more time at home, buyers have started looking for more room for home offices and larger gardens and utility spaces.

This is clearly reflected in the selling price.

The amount people are willing to pay for a big house compared to a small one has been blown away.

A four-bedroom home compared to a one-bedroom unit costs 20% more than it did pre-pandemic.

Larger homes perform best, but large apartments also outperform small homes.

The cost premium for larger housing has fallen slightly from its pandemic peak, but is still well above pre-pandemic levels.

Four. No review of commute distance

At first glance, the better performance of peri-urban areas such as south-west Sydney and north-west Melbourne suggests that remote work has eased the tyranny of distance.

This is because many people do not commute every day, so the cost of living away from the city center is lower, so people are willing to pay more for a home away from the city center. means

However, given the significant revaluation of large homes, the discounts for living further away from the CBD have changed little.

Therefore, the better performance in peri-urban areas is driven by the desire for larger homes, as these areas have more larger homes.

Larger homes closer to the city center are also rising in price.

So far, people are unwilling to pay more for a home away from the city, despite the need to commute less.

Five. More renters are moving into home ownership

Pandemic period was good first time home buyer.

This is due to a combination of low interest rates and first-time buyers tend to benefit from renting a higher percentage of the property. government incentives.

The last time we saw the same level of first-time homebuyer activity was in 2009, after the global financial crisis. This is also a time when we have seen interest rate cuts and government incentives.

Many were able to buy early to enter the market, but this Reduce number of rental properties Many of those homes were sold by investors. Of course, the new owner is no longer a renter, so there will be less rental demand.

However, the remaining renters will suffer the most from changes in household size and a significant increase in demand for housing. resumption of immigration this year.

This surge in demand, with no change in supply, means higher rental prices. This is very powerful and looks like it will continue.

And that can have a huge impact on the current tenant’s finances.

Will these changes continue to be maintained?

It’s not entirely clear if these trends will reverse, but it seems likely.

Rising interest rates could mean first-time homebuyers find 2023 more difficult than the past two years. This, combined with the strong ongoing rent increases, could slowly shift the pandemic shift back to smaller household sizes.

Households have been able to spread out to some extent following the pandemic’s reduced demand for housing, but will now have to group them together again.

Preference permanence tends toward regions and larger homes and is difficult to predict.

However, given that we have seen little reversal in these trends yet, it appears to be a secular shift in the housing market, as rural areas continue to outperform capitals and premiums for large homes have changed little. It seems that

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