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Why lockdowns aren't affecting property prices

No matter who you talk to about property, there's the notion that repeated and prolonged lockdowns are going to adversely affect housing prices, but the evidence shows that the two cities that have had the strictest lockdowns have had strong price increases.


Since COVID-19 started affecting our daily lives, and the enforcement of lockdowns and restrictions, Melbourne's median house price is up 14% and Sydney's a whopping 25%. The below graph shows the comparison between our 2 best performing capitals and the two worst performers - Darwin and Perth. Of particular note is how the gap has widened significantly over the last 2 years even in the face of lockdowns on the east cost, which Perth and Darwin have not experienced.



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Therefore if lockdowns and heavy restrictions were adversely affecting housing prices, then we would see that gap start to close up. The exact opposite of what you would expect is happening.


The simple answer to this is that lockdowns shouldn't be looked at to try and explain the property market performance. This is because these restrictions have reduced the number of properties listed for sale and the number of properties being purchased at an equal rate. However, the sellers that don't have to sell have been somewhat removed from the market creating an overall net loss of sellers vs buyers in the marketplace.


It has also been noted by many in the industry that people are wanting to get access to a larger living area so that if extended lockdowns continue, they have some more room to move. To picture this demographic more accurately, think of people in small apartments that may not even have access to a balcony. some of these apartments are the size of a modern kitchen/meals/living area.


The property market across the board has been pumped up by access to cheap finance. At the moment, if you're not borrowing money and would rather have savings in the bank, then you're actually losing money as a result of the pitiful savings account rates plus the rate of inflation. Banks have also relaxed some of their lending requirements meaning that they will allow you to borrow more even if your circumstances haven't changed. This means that buyers who were on the cusp of getting into the market have had their ability to purchase brought forward.


Lastly, there has been a flock to investment safety. Shares are volatile, cryptocurrency is still an unknown concept to most, cash in the bank is losing value. One thing that Australians love is property, and property has always been considered a safe bet when investing. This has pushed more investors into the market, and particularly into regional areas which have a lower price point and stronger yields.


At barbecues around the country, there is always talk about property investment and why you shouldn't touch it because someone knows someone whose aunty lost some money on a property, or had the tenants from hell, or overpaid, and the list goes on. There will also be a number of conversations that will centre around why a particular suburb or town is the next big thing. The thing to always have in the back of your mind through these conversations is whether the person telling the story has put their money where their mouth is. Chances are the answer is "no" for a long list of reasons (excuses).


Sometimes the most expensive advice is the free "advice" from friends and family. They mean well but are typically ill-informed as to their point of view.



Luke Jorgensen - Lush Property


Tags - Property Investment; Property Development; Renovation; Valuation; Valuer; First Home Buyer; Buyers Agent; Buyers Advocacy