How Covid turned home ownership into the Great Australian Fever Dream

Soaring construction costs caused tumultuous times for buidlers
Home ownership became difficult as interest rates and inflation took off
The Great Australia Dream is something most Aussies still think about

When Covid hit the Australian property market, house prices skyrocketed, people were priced out of the market, supply chain issues hit construction sites, bankruptcies and insolvencies plagued the building sector, and rather aptly, Australians’ aspirations to own a home became the Great Australian Fever Dream.

As the residential sales market raged red-hot rental vacancy rates plunged to record lows and won’t be letting up soon, and industrial real estate also never shook the superlative “record” – sounding rather like a broken record.

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But testament to Aussie grit and determination, a touch of irreverence, and a dash of insouciance, the dream of owning your own home has never left the Australian psyche.

Over half of Australia still dreams of home ownership

A survey* conducted by Great Southern Bank has found that 55% of Australians still want to buy a house in a place they want. Call it what you will: a home among the gum trees, a detached house, a standalone, that’s what over 50% of Aussies want.

Almost three out of four Australians said they would be happy to settle for an apartment or unit instead (71.6%), with just under a quarter of Aussies willing to buy a house in a suburb they didn’t like (24%) – the actual wording was “less desirable suburb”.

“The journey to owning a standalone house or your forever home may take time and may require trade-offs in the process. This may include options like buying an apartment, a duplex, a smaller house or even moving to a location slightly further afield to take that first step onto the property ladder,” said Great Southern Bank Chief Customer Officer Megan Keleher.

“Looking at smaller or more affordable housing options might also mean the property is within the price caps that apply for the Government’s Home Guarantee Scheme, including the new Regional First Home Buyer Guarantee, providing another boost for first time buyers.”

Megan Keleher, Great Southern Bank Chief Customer Officer

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Buying a house is still one of the best options, said LongView Head of Advisory, Warwick Brookes.

“Houses remain top value growth performers in the property market, and we’re pleased to see young Australians are still committed to finding ways to make this happen.

“We are now in a buyers’ market which is great for people wanting to get their first property. However, waiting for the right place and not rushing your decision can make a big difference too. It’s important to discuss your options with the right experts, from home loan experts to buyers’ advocates, to help make the right decision.”

The Covid property rollercoaster

Property cycles were chaotic throughout Covid, you can draw parallels as you wish: the property rollercoaster gave Six Flags a run for its money, or property cycles climbed Alp d’Huez, this was all followed by calamitous Covid qualms quelled by cash rate crunch.

While it certainly didn’t seem like the interest rate hikes didn’t do much in the early stages, much like rim brakes on an epic descent, the cash rate is starting to bite, both on inflation, and alas, average Aussie pockets.

Domain’s 2022 highlights reel for property recalled the point of inflection between two trends:

“House prices across the combined capital cities switched from the steepest annual growth rate on record in 2021 to the fastest quarterly decline on record in 2022.”

Domain End of Year Wrap 2022

Domain Chief of Research and Economics, Dr Nicola Powell said, “As the property market has slowed since last year, interest rates have risen and uncertainty in the market has meant the buyer pool is a lot smaller than it was.

“However, we’re certainly a country of dreamers who love searching for the most appealing and interesting suburbs near us whether that’s a tree or sea change in Queensland or vibrant inner-city living in Sydney. Next year, we predict that entry-priced houses and units will hold firmer, particularly in the more expensive capital cities so there may be some that will make their dreams a reality in these suburbs in 2023.”

Change in house prices so far this property cycle

Area	Upswing	Downturn	Now compared to pandemic trough
Combined capitals	33.6%	-4.9%	27.0%
Combined regionals	32.0%	-1.3%	30.3%
Sydney	40.2%	-8.3%	28.6%
Melbourne	24.1%	-6.0%	16.7%
Brisbane	42.1%	-4.3%	36.1%
Adelaide	46.9%	0%	46.9%
Perth	23.8%	-1.5%	21.9%
Canberra	50.3%	-6.0%	41.2%
Darwin	41.2%	-8.1%	29.8%
Hobart	52.2%	-3.3%	47.2%

Source: Domain, powered by APM. House price report, September 2022. Upswing compares prices from the pandemic trough to the price peak. Downturn compares prices from peak to now.

Interest rate rises added thousands to home loans, with Domain figures showing a $500,000 home loan would be paying almost $900 more per month, with a million dollar loan seeing borrowers fork out over $1,700 per month more.

The above figures are approximately how much home loan repayments have increased, monthly, between May and December this year, based on a 30 year principal and interest loan with an initial 4.75% variable interest rate per annum.

For more Domain predictions, The Property Tribune covered the details earlier this month.

Sea change trend for apartments comes to Cronulla

Speaking of fever dreams, how does a sea change sound? The pandemic trend of Aussies looking for a tree change or sea change saw regional house prices and rentals soar. The trend still seems to be sticking around, with a brand new luxury waterfront development in Cronulla, even if Cronulla isn’t that far away from Sydney.

This apartment development will see you sitting in the captain’s chair, with the property including three full-floor residences and uninterrupted, 180-degree views of oceanic splendour. Casa Capri is located at 2 Girrilang Road, opposite Elouera Beach, and is developed by Terra Ferma, in partnership with Pierge.

The beachside development is located in Cronulla. Image: Supplied.

Casa Capri luxuriates in the splendorous majesty of 180 degree views out to the shimmering samite of the Pacific Ocean. Image: Supplied.

Casa Capri is located at the end of a cul de sac in Cronulla Image: Supplied.

The Knight Frank marketed Casa Capri has uninterrupted views of the ocean. Image: Supplied.

Apartments at the Casa Capri begin at $9.2 million. Image: Supplied.

A bedroom in the luxurious Casa Capri development in Cronulla. Image: Supplied.

Building and construction faces uphill battle with insolvencies.

Referred to as the profitless boom, soaring construction costs paired with supply chain issues, and a host of other things like fixed price contracts have led to countless insolvencies, bankrupt builders, companies collapsing, businesses going into liquidation, and construction companies going into administration or voluntary administration.

Included in the mix are the following, to name but a few:

The first four on the list were all in November this year alone. with dozens more not listed above.

Construction challenges expected to alleviate in the year

In November, Master Builders Association in Western Australia held a luncheon where Master Builder’s Chief Economist delivered some enlightening insights.

Aside from interest rate expectations (tipped to top out at around 4% give or take) construction prices are set to fall – and it is not just because supply chains are getting back to normal.

Master Builders Chief Economist Shane Garrett spoke at the Master Builders luncheon in Western Australia. Image: The Property Tribune; Henry Thai.

Chief Economist Shane Garrett said speculators may be looking at the building materials market and seeing that the game is up, on the precipice of selling the stock they have been holding on to as prices of construction materials rose. This is likely to accelerate the fall in materials prices.

Having said that, the cost of concrete and cement may be on the rise.

Will 2023 be the year for affordable housing?

Forgive us, but, that’s a tough call.

Why?

Simple: The world may be getting back to normal, but buying and borrowing power will continue to fall and remain low for some time yet. This means demand continues to be heaped onto the affordable end of the market, with those pushed from higher budgets to lower budgets competing with first-home buyers, investors, and more.

2023 may be the “year of refinancing”, according to one expert from Loan Market Ellenbrook who spoke with The Property Tribune for our 2023 predictions. We certainly hope it will be given it was recently found that an incredibly low number of mortgage holders know how much their mortgages have risen by. How much you ask? Over three out of four.

Next year will also see the dreaded “mortgage cliff“, with CoreLogic’s Eliza Owen noting that “… migration and rental trends could also see a lift in investor and first home buyer activity as housing values find a floor.”

There will be interesting times ahead, also considering how people’s pockets weather 2023. If first-home buyers continue to dilly-dally, the rental market may still see a few extra heads bobbing around for some time yet, with inward migration to Australia putting additional pressure on the rental system.

Where to buy a house in 2023

Property expert, Lloyd Edge shared his predictions for 2023 earlier this month, offering a reminder that while the property market may be in a downturn, some markets will be hit harder, and some, the polar opposite.

Perth will shine even brighter come the new year, Real Estate Institute of Australia’s Hayden Groves told The Property Tribune in his predictions, published earlier this week.

The Property Tribune also has an extensive series of articles talking about the best suburbs for 2023, but of course, as always, do your own research before making any decisions.