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The Australian Housing and Urban Research Institute (AHURI) released new research that indicated that the fallout from the COVID-19 pandemic continues to impact the Australian housing market.
Undertaken for AHURI by researchers from Curtin University and Monash University, the research — The new normal: changed patterns of dwelling demand and supply — examined the effect the pandemic had on patterns of housing supply and demand, along with how the Australian housing market has altered over the last 10 years.
Lead author of the research, Professor Steven Rowley, said: “Australia will be dealing with the impact of COVID-19 on its housing markets for some time as increased construction costs and a reduced appetite for risk impede new housing supply.”
Indeed, the predicted lack of housing supply over the next two years will have implications for both home ownership and rental markets, according to the report.
It revealed that the pandemic changed what households want from their home, for example, more indoor and outdoor space, which was linked with working-from-home arrangements as well as a “heightened demand for lifestyle locations”.
In addition, the report found that the onset of COVID-19 led to “significant and distinct” changes in regard to where people want to live, with low or negative growth in inner urban areas, positive growth in regional towns and cities, and strong growth in traditional first home buyer areas.
“The pandemic showed us just how quickly demand for housing can change, with a shift to home buyers wanting to escape metropolitan areas; to larger homes and more private space; and to work from home in lifestyle locations,” Professor Rowley said.
Although, Professor Rowley stated we are now shifting back towards pre-pandemic patterns of demand.
“While COVID-19 drove some permanent changes, such as working from home opportunities for many, and a surge in regional house prices, the market appears to be returning to pre-pandemic patterns with location and affordability the key drivers,” Professor Rowley said.
“Interest rate rises have played a key part in this with the cost of buying having risen sharply. Tight rental markets across the country have limited household movements.”
As the building costs rise coupled with construction delays, there’s now an increased demand for established dwellings, which has created a “vicious cycle of housing scarcity”, the report stated.
“Owners of existing properties are reluctant to sell as there are a lack of options to buy. A very tight rental market means renting in between selling and buying a dwelling is difficult,” Professor Rowley said.
Business activity bounces back
Despite the housing market still feeling the impacts of the pandemic, business activity has returned to pre-COVID-19 levels, according to the March 2023 CreditorWatch Business Risk Index (BRI).
The data showed credit inquiries increased 28 per cent from February to March and were up “a massive 149 per cent” year on year. However, it’s important to note at the start of 2022, businesses were grappling with pandemic uncertainty after several lockdowns.
The data followed Banjo’s SME Compass report for 2023, which surveyed more than 1,000 SMEs across Australia and revealed that one in three SMEs are planning to acquire for growth in 2023.
[RELATED: Australia’s housing activity slumps across states: ANZ]
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