New analysis shows that Australian property prices have risen well above what they would have if COVID-19 had never happened.
According to a report from KPMG Economics, most capital cities were due for an upswing in 2020. Thanks to ultra-low interest rates and government support to the housing market during the pandemic, this gave the market a further increase, adding hundreds of thousands of dollars extra to property values.
The report The Impact of COVID on Australia’s Residential Property Market evaluated what had taken place over the past 18 months compared to a no-COVID-19 scenario and found that nationwide, house prices were now between 4 to 12 per cent higher and units up to 13 per cent higher than they would have been if the world had stayed “normal”.
In a “normal” 2020 scenario, pandemic policy responses, such as shifting the cash rate down to 0.1 per cent and launching the HomeBuilder program, would not have happened.
Under KPMG’s modelling, without the pandemic, Brisbane’s house prices would have risen a modest 9 per cent to $601,000; instead, they’ll rise a massive 20 per cent to $661,000.
| Capital | Median house price Dec 19 | Median house price Dec 23 without Covid |
Median house price with Covid 2023
|
| Sydney | $986,000 | $1,119,000 | $1,244,000 |
| Melbourne | $760,000 | $905,000 | $940,000 |
| Brisbane | $550,000 | $601,000 | $661,000 |
| Adelaide | $485,000 | $537,000 | $576,000 |
| Perth | $495,000 | $650,000 | $667,000 |
| Hobart | $519,000 | $651,000 | $701,000 |
| Darwin | $470,000 | $455,000 | $501,000 |
| Canberra | $745,000 | $846,000 | $913,000 |
Brendan Rynne, KPMG chief economist, said the initial uncertainty caused by the pandemic and consequent economic downturn saw a 3 per cent fall in prices in the June 2020 quarter. But it didn’t last long.
“Once market participants became confident that the pandemic would not result in a free-fall of home values, a combination of monetary and fiscal policies quickly began to push things the other way,” Dr Rynne said.
But the paper said that soaring price growth would temper over the next two years as mortgage rates rise and the fundamentals of the housing market begin to “reassert themselves”.