Despite the COVID 19 pandemic, the Australian property market has experienced a surge in the real estate sector. This is according to research from a research firm CoreLogic that has confirmed that house value had risen by 2.3% at the end of 2020.
It has been confirmed that first-time buyers (and property buyers in general) are increasingly entering the market property market, with Equifax finding:
“All states and territories experienced an increase in mortgage applications, with the ACT (+18.5%), NT (+12.2%), NSW (+7.7%) and VIC (+4.7%) the clear leaders. Most of this demand was driven by young Australians, with Gen Z accounting for +19.8% of applications. Homeownership desire among millennials (Gen Y) also increased (+0.2%), compared to a decline among Gen X (-6.5%) and baby boomers (-10.8%).”
So why is Australia currently experiencing a surge in property buyers?
Since the amendment of the Responsible Lending laws at the end of last year, first-time buyers have stormed the market. Initially, responsible lending laws came into force in Australia in 2009 after the GFC and provided guidelines for lenders when looking into loan applications, with the goal of ensuring they only give out loans to suitable borrowers. However, these laws were amended during the pandemic, with treasurer Josh Frydenburg stating:
“As Australia continues to recover from the COVID-19 pandemic, it is more important than ever that there are no unnecessary barriers to the flow of credit to households and small businesses.”
The goal was that by minimising red tape with regards to loans, the government could stimulate the economy. As a result, a simplified loan application process for borrowers made home loans more accessible, lessening the lengthy inquiry process and reducing approval times.
Ultra-low interest rates
It’s understandable that low interest rates encourage prospective home buyers to enter the market. And, the end of 2020 saw Australia finishing with a historically low interest rate of 0.1%, set by the Reserve Bank of Australia in an attempt to boost the economy. This has made mortgages incredibly affordable to a large number of Australians, especially as the RBA expects to maintain this rate at least three years – or at least until the labour market returns to full employment and inflation rises sustainably within the 2%–3% target range. Buys have taken advantage of these incentives and entered the market, making the value of the houses rise within a short period.
Seeking a post-COVID lifestyle change
The rate at which people have adapted to working from home has raised questions. Are people ever going to work in offices again? Is working from home a viable option? It’s become evident that for many, working from home is a legitimate arrangement, which seems unlikely to end even after the end of the pandemic. As a result, many Australians are seeking a new lifestyle in a post-COVID period where they will be working from home more frequently, and are therefore looking for the best property possible to suit this new lifestyle.