Where property prices rose most over the past five years

The typical house has jumped in value over the five years since the pandemic began, defying early predictions of 20 per cent-plus property price falls.

The gains are relatively stronger in the mid-sized capitals than Sydney, which has been stronger again than Melbourne.

Wages have risen by less than half the increase in housing values over the same time-frame, making housing affordability worse.

The typical house in Sydney rose 35.8 per cent in value, or almost $386,000, since March 2020, CoreLogic figures showed. The typical unit is 9.9 per cent higher.

Melbourne’s median house value is 12 per cent higher in that time period, a gain of more than $98,000, although the median unit value is only 0.7 per cent higher.

Brisbane houses jumped 70 per cent or $402,000, while Perth houses soared 77.8 per cent or almost $368,000.

It’s a contrast to the early days of the pandemic when economists were forecasting high unemployment and deep property price falls.

“There was a lot of ‘the sky is going to fall’ type forecasts, and that’s completely legitimate and expected [when] we’re entering into a period of extreme uncertainty,” CoreLogic head of research Tim Lawless said.

“What you can’t really predict is what the policy response is going to be and how consumers will react.”

He highlighted the record levels of support for households including emergency lows in the cash rate, plus the JobKeeper program that kept employees connected to their employers even when their business revenues plunged, increased JobSeeker payments and the HomeBuilder program to encourage new home building.

This enabled a wave of first home buyers who took advantage of lower mortgage serviceability buffers, but had to compete for the few homes for sale, he said. Many buyers wanted houses rather than apartments to have space to work from home.

With the benefit of hindsight, buyers could have made oversized gains by purchasing a house in once-overlooked Perth, which boomed.

The pandemic also pushed up prices in regional Australia, including sought-after sea-change locations such as the Gold Coast as well as smaller, relatively affordable towns that doubled in value yet remained cheaper than $500,000.

The largest jump in value was in Murray Bridge in South Australia, where dwelling values have doubled since March 2020. A typical home there rose 101 per cent to a median $496,101.

Kingaroy in Queensland and Geraldton in WA rose 95.6 per cent and 94.4 per cent respectively.

Lawless said Sydney’s return was in the middle of the pack, although in dollar terms it was similar to some mid-sized capitals.

Melbourne’s return was not as high because many Melburnians left during the lockdowns and higher land tax more recently has deterred investors, who have flocked to the cities with stronger capital growth, Lawless said.

AMP chief economist Dr Shane Oliver was among those forecasting substantial house price falls in March 2020 because the pandemic looked likely to increase unemployment and force households to sell their homes.

But the policy response from the federal government and Reserve Bank protected households, along with mortgage holidays from the banks, before low interest rates meant property prices took off.

Oliver reflects that this is the problem with forecasting.

“It’s contingent on the things you know at the time, and then the facts change and you’ve got to change your forecast,” he said.

“The severity that was forecast, for deep recession, high unemployment and plunging house prices, caused policy makers such as the Morrison government and the Reserve Bank to think ‘well, okay, this could happen if we don’t act,’ and they acted very aggressively.”

He did not expect JobKeeper. “It was one of the best policy moves undertaken by an Australian government in a crisis, and it nipped the crisis in the bud.”

ANZ senior economist Adelaide Timbrell added that lockdowns forced many households to save money because they could not go out and spend as much as usual.

“It was people who had high-income stable jobs that were able to be done at home [who saved]. These are the same people in a lot of cases who are either in the property market or prospective home buyers,” she said.

“The people who were more likely to lose their job were in industries were higher renter populations.”

A structurally lower unemployment rate since then has increased the number of workers who can save for a home.

Meanwhile new home construction became less feasible and dwellings per person have fallen in Brisbane, Adelaide and Perth, while increasing in Sydney and especially Melbourne.

ANZ forecasts about 1 per cent growth in housing prices this year.

“The number of people who can afford to keep pushing that property market up gets smaller, and generally we don’t see housing prices able to continue that momentum for very long.”