Australia’s Post-Pandemic Recovery

There’s no doubt about it: Australia’s post-pandemic comeback has been a little short of miraculous.  In fact, that’s the exact word that was used by the CEO of the Commonwealth Bank in April last year to describe the country’s recovery!

While the past two years have seen economic tragedy in many countries around the globe, we’re lucky that Australia isn’t one of them.  In fact, to the contrary, the land down under has, and still is witnessing an astonishing post-covid recovery.

Despite a series of prolonged lockdowns affecting a wide range of industries in all parts of the country, we’ve put up a brave fight!  And while this may have left many a negative forecaster scratching his head in amazement, there’s nothing particularly mysterious about Australia’s economic performance – it’s a result of strong economic policy, both fiscal and monetary.

The property market is often viewed as a kind of a barometer in terms of economic stability and consumer confidence.  So, let’s take a moment to zoom in and look at what’s happening in the real estate world, and how that’s contributing to Australia’s economy.

How is Housing Contributing to the Economy?

Well, to put it simply, the property market has seen its biggest upswing on record.  Over the past two years, prices have risen dramatically across all capital cities, and most rural areas too.

In the 12 months to November 2021, national dwelling values rose an astonishing 22.2%.  The same period saw an estimated 614,635 homes sold, which is higher than any 12-month period since 2003.

So what’s stimulating the market?  Where’s the fire in the belly?

According to Eliza Owen, CoreLogic’s Head of Research, ‘strong housing market activity has been supported by a combination of factors, including low interest rates and relatively subdued levels of available stock’.

Housing-related government stimulus packages such as the First Home Loan Deposit and the HomeBuilder schemes have played a big role in encouraging many Australians to take the first step onto the real estate ladder – these grants have made home ownership a reality of thousands of Aussies, for whom it has always been out of reach.

And it’s had a snowball effect.  The increase in demand, coupled with low levels of inventory has driven competition and prices skyward.

Historically low-interest rates have provided another major incentive for folks to purchase their own home.  With many homeowners able to service a mortgage at very affordable rates (in some cases less than the cost of rent) it’s the obvious option.  And with rates not forecasted to rise in the foreseeable future, consumer confidence is high.

Where is the Market Headed for 2022?

Is this rate of growth sustainable?  Is it likely that property prices will keep rising throughout 2022?

While none of us claim to be crystal gazers, there is significant evidence to suggest that 2022 will see some of the heat go out of the market.  However, in saying that, it’s important to keep this in perspective because to date, the property world has been spiralling upward at a dizzying pace.

The year started strong, with January, typically the quietest month on the real estate calendar, seeing a higher-than-average number of properties sold at auction.

‘The early indication is that housing markets are starting 2022 with a similar trend to what we saw late last year.  Values are still broadly rising, but nowhere near as fast as they were in early 2021’ says CoreLogic’s Tim Lawless.

In Melbourne, prices are forecasted to remain high, but the momentum may slow somewhat.  In addition, an increase in inventory levels means that competition is not as fierce, and buyers have more options.  The re-opening of national borders is predicted to give the rental market in the CBD a much-needed jab in the arm.

The federal election at the end of the year may rock the boat a little – traditionally the housing market slows somewhat in the leadup to an election, which is understandable.

Want to know more about the forecast for Australia’s housing market for 2022?
The team at Love & Co are your go-to for all things real estate in the North! Call your local office today.