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The COVID-19 housing boom may have peaked in most parts of Australia but analyst CoreLogic has identified six ‘‘remarkable’’ shifts caused by the pandemic over the past two years that will have a long-term effect on national property markets.

Record house prices and buyer debt lead the pack. Close behind are rental increases and yield falls, a spike in first-home buyer numbers, the shift to the country and a widening chasm between house and unit pricing.

‘‘The global pandemic has catalysed remarkable shifts in the Australian housing market,’’ CoreLogic says in a new report, Two years on: Six ways COVID-19 has shaped the housing market.

‘‘From the temporary shutdown of cities, to an unprecedented monetary policy strategy, the COVID-19 period has had distinct impacts on the composition of buyers and the dynamics of the housing market.’’

The most obvious impact is on housing prices. According to CoreLogic’s Home Value Index, home values across Australia leaped 25 per cent to record highs in the two years to the end of February. The median national dwelling value increased $174,000 to $728,000 over the same period.

First home buyers, fuelled by grants such as the federal government’s HomeBuilder payments, fired up the market in 2021, mirroring what happened a decade before when the First Homeowner grant was temporarily boosted in 2009-10.

But that turned out to be a sugar hit and when the government money dried up and house prices increased, first-home buyer demand returned to its long-term average of 24 per cent of all owner-occupiers.

Through this period rents rose 12 per cent, once again to record highs, the fastest growth since 2008.

Conversely, gross yields for investors fell to a record low of 3.21 per cent as purchase prices increased at a faster rate. The median national rent is now $470 a week.

‘‘As housing growth has started to slow, this record low gross rent yield figure appears to have begun stabilising,’’ CoreLogic said.

Housing debt surged, obliterating previous benchmarks, as buyers borrowed more to get into a fast-moving market.

The ratio of housing debt to household income reached 140.5 per cent in the second half of 2021. Home loan volumes are still exceptionally high, with new loan commitments totalling $33.7 billion in January.

CoreLogic said rising debt levels ‘‘creates a vulnerability’’ in the Australian economy, but high asset values and low interest rates reduced the risks, it said.

People want more space than ever, driving trends five and six: the divergence of house and apartment prices and much higher levels of migration from cities to the regions.

When combined with a shortage of stock, this caused regional housing prices to grow at almost twice the speed of city properties – 36.5 per cent compared with 21.4 per cent.

However, growth in most markets is now moderating, the report says.

The time it takes for a couple to save a 20 per cent deposit to buy an entry-level house has blown out by an extra 11 months during 2021 – nearly three times longer than the additional time recorded in the previous year – but the slowing market could offer a reprieve for first home buyers in the year ahead.

Aspiring home owners could now need as long as five years and eight months to save up for a deposit across the combined capitals as prices have surged to record highs, the Domain’s annual First Home Buyer report finds.

Sydney’s 33.1 per cent house price growth for 2021 would require first-time buyers to save for an additional 18 months – more than three times longer than the additional time needed in the previous year – for a total of eight years and one month.

The extra time needed to save the 20 per cent deposit has more than doubled in Canberra, Hobart and Adelaide and climbed six-fold in Melbourne during the past year.

It would now take home buyers seven years and one month to save for the deposit in Canberra, five years and 10 months in Hobart, four years and seven months in Adelaide and six years and six months in Melbourne.

‘‘In a climate where incremental wage growth and rising mortgage repayments and rental prices are paired with escalating property prices, the prospect of saving the lump sum deposit is becoming more challenging,’’ said Nicola Powell, Domain’s chief of research and economics.

‘‘We’ve got tight vacancy rates and with the international borders reopening, we’re likely to see rents continuing to rise, which makes it tough for renters to put spare cash aside for that deposit.’’

For first home buyers willing to compromise on the housing type, units offer a faster way to get into the property ladder, Dr Powell said.

‘‘Unit prices growth was more modest compared to houses, which means you need a smaller deposit,’’ she said.

It still took first home buyer and social worker Holly Marchioni more than four years, working two jobs and saving diligently to come up with the required amount to buy her two-bedroom unit in Bendigo, Victoria. ‘‘I was studying full time to become a social worker when I first started working two jobs to save the deposit because I really wanted a place of my own,’’ she said.

‘‘I’ve since graduated and am now working full time, but I continued to work two jobs because prices have risen so much. It was terrifying to see prices go up within weeks or months, so I decided to ramp up my savings and buy as soon as I had saved enough money.

Across the combined capitals, first home buyers would shave two years and two months if they opted for a unit rather than a house.

Buyers would cut two years and seven months in Sydney, two years and two months in Melbourne and three years and four months in Canberra.

Aspiring home owners buying a unit in other capitals will slash between one year and one month to a year and eight months.

The prospects of a higher interest rate later this year could help shorten the time needed to save a deposit as prices fall, Dr Powell said.

‘‘We’re already seeing various metrics soften, which indicate the market is moving into the next stage of the property cycle,’’ she said.

A surge in listings across some of Melbourne’s inner suburbs could trigger faster-than-expected house price falls, as buyer demand eases amid higher mortgage rates, rising uncertainty and poor affordability, new analysis shows.

Melbourne’s inner areas, the inner south, inner east and the north-east have all posted above-average stock levels in the past three weeks as more vendors decide to cash in, Suburb-trends director Kent Lardner said.

The inventory level in Melbourne’s inner Stonnington West has jumped to 4.6 months after listings climbed by 23 per cent, while stock in Stonnington East has more than doubled to 4.17 months compared to the long-term average, Suburbtrends data shows.

‘‘The inner Melbourne market has swung back in favour of buyers as close to 2.2 per cent of owners have decided to list in recent weeks, which may be a tipping point for these suburbs,’’ Mr Lardner said.

‘‘In recent months, the Stonnington region has experienced a fall in median prices, which we estimate [to be] a 9 per cent drop . . . in the last 12 months. Unless demand increases, prices may fall further and faster if listings volumes continue to build like this.’’

Listings of less than 30 days rose sharply around the country over February, according to SQM Research. Sydney’s new listings jumped 81 per cent while Canberra soared 86.1 per cent. Melbourne’s new listings climbed by 76.7 per cent, Brisbane was up by 51.8 per cent, Adelaide by 53.4 per cent and Hobart by 53.3 per cent. Darwin rose by 71.3 per cent, Perth by 43 per cent and the new listings nationally increased by 62 per cent.

‘‘The upward surge in listings over February suggests some sellers are taking profits after phenomenal price rises were posted in 2021,’’ SQM Research managing director Louis Christopher said. ‘‘We could see the upward trend in listings continue through the first half of the year as more sellers seek to take profits.’’

In Melbourne’s inner east, new listings more than doubled to 2488 over the month to February as more vendors entered the market, according to SQM Research data.

‘‘There’s been a large pick-up in listings in the area, and we’re now seeing the pendulum swing towards the buyers in this market,’’ Mr Christopher said.

Stock levels have also risen sharply in Sydney’s inner west, with new listings jumping by 88 per cent in February.

‘‘The stock build-up is likely a reflection of the slower spring season, but also a rise in vendors wanting to sell despite the slowdown in the market,’’ Mr Christopher said.

But the large rise in listings in the area was unlikely to tip the market towards buyers yet, Mr Lardner said.

‘‘It will improve choices for buyers, but conditions remain red hot in this area, and there’s still strong upward pressure on prices,’’ he said.

‘‘The Leichhardt region has had a strong imbalance between buyers and sellers for over a year now. Even though listings volumes have increased, the number of buyers appears to be more than a match for the additional supply.

‘‘Inventory levels still remain low at close to one month. This means if nothing else is listed for sale, in theory we would have nothing available to sell in four or five weeks’ time, so it will take a considerable boost in listings volumes or a large reduction in buyers before we see conditions easing here.’’

The Bankstown area in Sydney’s inner south also posted a sharp rise in listings, but it would probably be absorbed quickly, Mr Lardner said.

‘‘Listing rose 21 per cent and prices are levelling out at a median of $1.2 million, however the market is still tipped slightly in favour of sellers,’’ he said.

The number of women who bought a home last year rose to nearly match male buyers, despite the persistent gender pay gap and multiple lockdowns during the pandemic, analysis by CoreLogic shows.

During the past year, the share of property purchases by women climbed by 0.9 percentage point to 28.3 per cent from 2020. Over the same period, the proportion of homes bought by men dropped by a similar amount to 29.6 per cent. The remainder of the purchases is by couples.

‘‘COVID-19 and the past year have seen mixed wealth and income outcomes for women, as remote work arrangements threatened to land women with more unpaid carer work, particularly while children were learning remotely, and the health system became more strained,’’ said Eliza Owen, CoreLogic’s head of research.

‘‘Interestingly, however, the past year saw a lot more parity between property sales associated with women and men, which I think could be linked to relatively low concentrations of investor activity, government schemes that help with deposit hurdles, or the increased role of intergenerational wealth in housing where parents help their children do so irrespective of gender.’’

Melbourne-based Mickayla Chapman, who recently bought her first home through ME Bank, said while it took her two years to save the deposit, the financial help from her parents enabled her to buy a two-bedroom, two-bathroom apartment in Reservoir quicker than most people.

‘‘I sacrificed a lot when saving for a deposit and really watched my expenses,’’ she said. ‘‘I was lucky to have my parents help with my deposit, so I could buy sooner.

‘‘It was an overwhelming process, but it was worth it. Buying my home allows me greater freedom, security, and a sense of accomplishment. It’s an asset that could grow in value, but most importantly, a place I could call my own.’’

Ms Owen said the share of properties bought by women had been rising.

‘‘Australia shows a really interesting trend where there’s a marginal shift, year by year, of women purchasing a slightly higher portion of properties, and men purchasing a slightly lower portion,’’ she said.

‘‘This positive trend may start to reflect greater gender parity in home ownership over time.’’

The average loan size for women applying for a single mortgage increased by 7 per cent to $411,752 in 2021 compared with 12 months prior, while the overall proportion of single female applications increased by 1 percentage point to 50 per cent.

In comparison, single male applications rose by 6 per cent to $449,273 in 2021 compared with 12 months prior, while the overall proportion of single male applications fell by 1 percentage point to 50 per cent.

Despite the encouraging trend, the share of home ownership among women has continued to lag men, according to CoreLogic.

Just 26.6 per cent of homes were owned by women, compared with nearly three in 10 (29.9 per cent) owned by men as of January this year.

Milena Malev, CoreLogic International’s general manager for financial services and insurance solutions, said property price increases might have further exacerbated the gender wealth gap in property ownership.

‘‘Given there’s a high level of equity held in real estate, if you don’t own property, that’s a big source of household wealth and security you don’t have access to,’’ she said.

‘‘Property price growth has also vastly outpaced income growth over this time, with the gender pay gap widening in parallel, too.’’

The gender pay gap in full-time ordinary earnings rose from 13.4 per cent at November 2020 to 13.8 per cent in November 2021, according to ABS data. This means men can save the 20 per cent deposit for the current median dwelling value about a year faster than women, said Ms Malev.

‘‘Men are not only accumulating greater wealth from a higher proportion of existing property ownership, but they’re also able to get into the market sooner than women and start that wealth accumulation in a growth market,’’ she said.

CoreLogic also found that men owned 28.5 per cent of all the houses analysed, compared with just 24 per cent owned by women.

‘‘Detached houses generally accumulate more value over time than units, so this essentially accentuates any wealth disparity that comes from housing,’’ said Ms Owen. ‘‘If it continues to widen, then so too would the wealth gap in housing.’’

Western Sydney industrial land values are tipped to rise by up to 25 per cent this year after growing around 50 per cent in 2021.

Agent David Hall, national director of industrial at Colliers, said he had never seen anything like it.

Based on deals he was now working on, Mr Hall said prices were already 10 per cent to 15 per cent above what was achieved at the end of last year.

‘‘There’s very limited options left for groups to buy, and we’re still tracking over $2.5 billion worth of capital chasing industrial land in Sydney,’’ he said.

‘‘That tells me if you were to ask ‘what does the horizon look like?’, I’d say somewhere between 20 and 25 per cent growth again this year.’’

A key factor is rising industrial rents. ‘‘Groups running development feasibility studies at higher rents are going to have the ability to pay a higher residual land value than previously,’’ Mr Hall said.

The ‘‘only thing stopping it growing at the same rate as last year is that some of that rental growth will be offset by increased construction pricing’’, he said.

‘‘So that will put a limit, to some degree, on how hard growth will go this year. But in saying that, there’s nowhere the amount of options coming to market that we saw last year.’’

In its latest Industrial Development Update for Western Sydney, Colliers said the region’s land values grew by 17 per cent in the first half of 2021 and double that from July to December, when they rose 34 per cent.

Supply is shrinking, with an estimated 1805 hectares of net developable industrial land available, 9.5 per cent less than in mid-2021.

‘‘With uncertainty remaining around the volume of industrial land within the Aerotropolis [at Badgerys Creek], this undersupply is expected to persist in the short to medium term,’’ the report said.

‘‘Fragmented ownership remains one of the largest barriers to development within western Sydney.’’

Issues in getting development land to market, such as the provision of services, mean that as little as 227 hectares of industrial land could be developed in western Sydney this year.

‘‘Demand has been extraordinary, with over 260 hectares taken up in 2021, which was almost double the levels recorded in 2020 and the long-term average,’’ Mr Hall said.

‘‘The take-up of land was strongest within the Kemps Creek and Eastern Creek precincts.’’

AFR Article_ 09.02.2022

Australia and New Zealand Banking Group’s mortgage market woes got worse in December, despite assurances late last year that the bank would return to growth this half.

Data from the Australian Prudential Regulatory Authority showed ANZ went backwards 0.1 per cent in the owner-occupier housing market and saw the same marginal growth of 0.1 per cent in investor mortgages compared with November.

ANZ chairman Paul O’Sullivan told shareholders in November that the bank expected its Australian home loan portfolio to return to growth in this half, and for ANZ’s growth to be in line with system growth some time in the second half of this financial year.

National Australia Bank recorded the strongest month-on-month increase of the big four banks at 1.6 per cent across both investor and owner-occupier mortgages. Macquarie Bank continued its strong trajectory, up 5.2 per cent, while Westpac continued to retreat from investor mortgages, down 0.7 per cent compared with November.

RateCity director of research Sally Tindall said investor mortgage growth had slowed across the board, despite record high levels overall.

‘‘The value of investor loans hit another record high this month, but the pace has notably slowed, which could be sign some of the heat is coming out of the market,’’ she said.

Macquarie analysts said in a note that overall housing credit grew at 8.7 per cent on an annualised basis over the three months to December 31.

‘‘On a three-month annualised view, Commonwealth Bank of Australia and National Australia Bank are growing at 1.3 times and 1.6 times system respectively, while ANZ is showing no growth,’’ Macquarie said.

Outside of the majors, Bank of Queensland recorded growth of 1.2 times system on the back of ME bank’s stronger volume growth in the past month, Macquarie said.

RateCity said the banks had increased their fixed rates by as much as 1 per cent or more over the past year. They were likely to move on standard variable rates even if the Reserve Bank of Australia, which left rates steady yesterday, keeps the cash rate on hold at 0.1 per cent for the rest of 2022.

‘‘Even if the RBA holds out until 2023, there’s a strong chance lenders will hike variable rates regardless, particularly if funding costs continue to escalate,’’ Ms Tindall said.

‘‘A series of cash rate hikes, whenever they come, are likely to put a handbrake on our property market. Anyone borrowing at capacity will see their budget shrink, which could be enough to cool things down, particularly in property hotspots.’’

Ms Tindall also warned that more than a million homeowners have never experienced a rate rise.

‘‘It’s incredible to think there are well over 1.1 million households that have never experienced a cash rate hike,’’ she said. ‘‘Australia hasn’t seen an RBA rate rise in more than 11 years, which means there is a generation of mortgage holders who could be in for a shock when their monthly repayments automatically start rising.’’

Analysts have warned growth in the home loan market would start to slow this year, as credit conditions tighten.

‘‘While most people will be able to take future rate hikes on the chin, albeit through gritted teeth, some people who have been hit hard financially by COVID or who haven’t seen a decent pay rise in some time could find it difficult to balance the budget,’’ Ms Tindall said. ‘‘The data shows the mortgage market is still in full swing. However, future rate rises could shake things up.’’