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Pandemic property boom: will it get too hot to handle?

Pandemic property boom

Here we go again – interest rates are at an all-time low and housing markets are running hot.

Property tropes missing from the city’s narrative for years are back in the news. Dumps are selling for squillions; big crowds are showing up at auctions; reserves are being smashed.

House prices in Australia jumped by 2.1 per cent in February, the biggest month-on-month gain in almost 18 years according to CoreLogic’s national home value index.

A year ago, as the coronavirus pandemic took hold, a swag of experts predicted a house price rout. But the unprecedented government stimulus unleashed to nurse the economy through the pandemic crisis has been very favourable for residential property.

The boom has been led by smaller cities and regions, which attracted many new buyers during the pandemic. CoreLogic’s figures show during the past year dwelling values have risen by 11 per cent in regional NSW and by 8.3 per cent in regional Victoria.

But big cities are catching up. The median price of a standalone house in Sydney rose by an eye-watering $4200 a week during the last three months of 2020 to hit a record $1.21 million, Domain Group figures show. Melbourne wasn’t far behind – its median house price added $3600 a week during the December quarter to reach $936,000, also a record.

The nation’s biggest mortgage lender, Commonwealth Bank, has forecast house prices in Sydney and Melbourne to rise by at least 12 per cent over the next two years.

Home lending – which is a reliable indicator of future property price gains – is at record levels. Australians borrowed $28.75 billion to purchase housing in January, 44 per cent more than a year earlier.

“The heat in the housing market is really intensifying,” says ANZ economist Felicity Emmett.

But the strength of the price rally has stoked worries.

“It’s a bit of a blast off in house prices,” says AMP Capital economist, Shane Oliver. “But obviously it will, at some point, raise questions about housing affordability.”

Back in 2003 – at the tail end of a previous housing boom – then prime minister John Howard dismissed concerns about high property prices, saying: “I don’t get people stopping me in the street and saying, ‘John you’re outrageous, under your government the value of my house has increased’.” He claimed most people feel “more secure and feel better off” when the value of their home has gone up.

But opinion polls show the cost of housing has become a growing source of anxiety, especially in big cities.

When Gladys Berejiklian became NSW Premier in 2017 she famously cited housing affordability as one of her top priorities, saying at the time it was the “biggest concern people have across the state”.

The latest Ipsos Issues Monitor, which asks respondents to select the three most important issues facing the community, showed housing affordability is again worrying voters. Housing was the equal top concern in NSW in the December quarter, alongside health and unemployment. Concern about the cost of housing has also risen in Victoria.

During the past decade the housing market has also been cast as a demographic battleground where first-time buyers are pitted against cashed up investors who benefit from negative gearing and the capital gains discount. Meanwhile, an army of young renters is left wondering if they will ever own a home.

Grattan Institute economist Brendan Coates says the latest price surge continues a 25-year trend dividing housing haves-and-have-nots.

“Home ownership has been falling for all age groups under 65, particularly for younger lower-income households and what’s happening now will only exacerbate that trend,” he says.

“If house prices keep rising relative to incomes it’s going to become harder for young people, especially those on lower incomes, to purchase a home. So for them that great Australian dream will recede even further into the distance.”

While there has been an encouraging lift in borrowing by first time buyers in recent months, Coates does not expect that to have much effect on the overall level of home ownership.

“Some first home buyers have made gains recently but the reality is the bottom 40 per cent of income earners are priced out of most of our major cities,” he says. “I wouldn’t expect to see a big jump in home ownership rates among that lower income cohort which is the group we are more worried about.”

Falling home ownership has major long-term consequences for Australia, especially the distribution of wealth. It will also leave more people vulnerable to homelessness in old age, especially those with low incomes.

The experience of 67-year-old pensioner, Su Day, illustrates this challenge. She was recently made homeless following a dispute over her father’s estate and says high housing costs in Sydney make it “downright impossible” for people like her.

“I am locked out,” Day says. “It’s terrifying.”

A recent Human Rights Commission report found women aged over 55 were the fastest growing cohort of homeless Australians.

Day now lives at Mosman House, a project providing transitional accommodation for older women run by Link Housing. But she says her experience highlights the need for more social and affordable housing which offer permanent alternatives for low income earners.

Motivating forces

The main driver of the post-pandemic property boom has been record low interest rates. During the past 18 months the official cash rate has been cut from 1.25 per cent to just 0.1 per cent and the central bank has made it clear those settings will remain in place for an extended period to underpin the economic recovery.

Coates says “we shouldn’t be surprised” house prices have surged given interest rate reductions of that magnitude.

He points to Reserve Bank modelling published in 2019 which found a sustained reduction in interest rates of 1 percentage point would lift housing prices by 30 per cent over a period of three years.

In addition, pent up demand, government incentives, an improving post-pandemic economy and even a fear of missing out have helped stoke the boom.

Detached house prices have been especially strong, far outstripping unit prices during this upswing. The median house price in Sydney was 66 per cent higher than the median unit price in the December quarter, Domain Group data shows, the biggest difference since it began tracking prices in 1993. Melbourne’s median house price is now 64 per cent higher than the median unit price compares well above the average price gap of 52 per cent over the past decade.

So far, owner-occupier demand has been the main driver of price gains but the latest lending data shows investor interest in housing is now on the rise.

But the strength of the rally poses another question familiar to Australians: will the housing market overheat? Might the unique policy responses to the pandemic inadvertently inflate a dangerous housing bubble?

Reserve Bank Governor, Philip Lowe, told a parliamentary committee last month the recent strength of the house prices has been helpful for the economy as it recovers from recession.

Pandemic property boom

RBA governor Philip Lowe said it would not lift interest rates in a bid to curb property price growth. “The RBA does not – and should not – target housing prices.” CREDIT:BLOOMBERG 

“The past year would have been even more complicated if there had been large and widespread falls in housing prices,” he said.

But authorities are “watching closely.”

Dr Lowe will not lift interest rates in a bid to curb property price growth.

“The RBA does not – and should not – target housing prices,” he said last month.

But financial authorities can take other steps known as “macroprudential” regulations to ensure financial stability.

That might include caps on bank lending or a requirement for bigger deposits from home borrowers.

On Wednesday the Council of Financial Regulators (which co-ordinates the nation’s main financial regulatory agencies) issued a pointed statement saying it put a “high emphasis on lending standards remaining sound, particularly in an environment of rising housing prices and low interest rates”.

The council will also “closely monitor developments and consider possible responses should lending standards deteriorate and financial risks increase”.

ANZ’s Felicity Emmett expects regulators to intervene later this year.

“That’s when we think they will step in to slow things down a little bit,” she says.

But in the meantime it seems Australia’s post-pandemic housing boom has a way to run.


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What’s within walking distance from Bide apartments

Nestled in the heart of Newstead, the 89 residence apartment tower has been designed as an urban getaway just 3 kilometres north-east of the Brisbane CBD

The latest inner-Brisbane apartment project by the local developer Dibcorp Properties is Bide, which is located in the heart of the upmarket riverfront suburb of Newstead.

The location of the 89-apartment development Bide, at 21 Longland Street, puts it just a stone’s throw from the Brisbane River, and the convenience of the Teneriffe Ferry Wharf which connects the suburb to the CBD.

Residents will have immediate access to Gasworks Plaza on the adjoining Skyring Terrace riverfront street, which is home to a Woolworths and a numb er of other stores, as well as restaurants, cafes and coffee shops like Ping Pong, Yolk and Campos Coffee.

On Longland Street there’s the popular eateries include Smoky Moo, The Defiant Duck, Drum Dining and the Milky Lane Newstead.

Cutting across Longland are a number of side streets like Stratton and Wyandra, which have a number of retailers and boutiques for residents to explore like a Think 24hr fitness, Smile Studio, and Brisbane Skin.


Bide 21 Longland Street, Newstead QLD 4006

Designed in collaboration with architects from Twohill & James, Lat27 and Wiltshire Stevens Architecture.

Nestled in the heart of Newstead, the 89 residence apartment tower has been designed as an urban getaway just 3 kilometres north-east of the Brisbane CBD.

It is the latest part of the suburb’s transformation to an up-market residential suburb belying its industrial past. Timber yards, asbestos works, wharves and woolstores once dominated much of the predominantly commercial suburb, now one of the most sought-after apartment spots in Brisbane.

Bide is just a short distance away from Route 25 as well as the Teneriffe Ferry wharf and bus stations for those who choose public transit. As such it is right by the Brisbane river.

The proximity to schooling, as well the large three-bedroom apartments on offer, make Bide attractive for families. The nearby educational institutions include:

  • Torrens University Australia – Satellite campus – 1.4km away
  • University of Queensland – Satellite campus – 1.9km away
  • Queensland University of Technology – Main campus – 3.3km away
  • New Farm State School – Public School – 1 km away
  • Music Industry College – Private School – 1.1km away
  • Angelorum College – Private School – 1.1km away

Dibcorp has offered residents the opportunity to work hand in hand to tailor the layout, configuration and finishes of their apartment.

Apartments inside feature open-plan living and dining, a balcony space and a study nook in some apartments for working from home.

Inside, residents can enjoy 600 sqm of amenity across two levels, including barbeque facilities, private cabanas, landscaped areas and seated space throughout.


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Brisbane’s best property buys: Six must-see homes under $700,000

Here’s our pick of some of the best property buys in Brisbane right now.

3/888 Wynnum Road, Cannon Hill 

Brisbane’s best property buys

3/888 Wynnum Rd Cannon Hill QLD 4170 

Eight is one of the luckiest numbers in many cultures, promising owners of this inner east home fortuitous times ahead. The two-bedroom, two-bathroom, 147-square-metre apartment certainly has a well-positioned tiled ground-level courtyard, ready to host soirees under the Brisbane sun or starlight. It is a massive 7.8 metres by 6.9 metres and faces the lush green ovals of Bill Cash Memorial Park.


Private sale

LJ Hooker, Ashleigh Hansom 0448 742 538

2404/179 Alfred Street, Fortitude Valley 

Brisbane’s best property buys

2404/179 Alfred Street, Fortitude Valley QLD 4006 

Bridge-spotters get an eagle’s nest view of one of Queensland’s most iconic at this sky home. The two-bedroom, two-bathroom apartment comes with 78 square metres of title and uninterrupted views of the Story Bridge and inner-cityscape. It claims a lofty level 24 vantage point and its edgy designer tower has a suite of you-beaut perks for residents, including a pool, timber sun platforms, a state-of-the-art gym, cinema room and lounge area.


Private sale

Ray White, Kai Liu 0430 568 851

42 Bulgin Avenue, Wynnum West 

Brisbane’s best property buys

42 Bulgin Avenue, Wynnum West QLD 4178 

Multigenerational living is catered for at this three-bedroom high-set house, on the market for the first time since the mid-1970s. Upstairs the floor plan maps out three bedrooms, a living, dining, a sunny front porch, and a shady rear terrace to take in the green landscape of the back yard. Downstairs, buyers get a second kitchen, another toilet and a miscellaneous room that could function as a study, another bedroom or studio.


Private sale

Raine & Horne, Chris Vote 0433 411 540

5/370 Zillmere Road, Zillmere 

Brisbane’s best property buys

5/370 Zillmere Road, Zillmere QLD 4034 

Sports nuts hunting a first home or rental asset will find good form at this two-bedroom pad in its neat three-storey brick walk-up. The apartment is a punt kick from O’Callaghan Park and the suburban police-citizens youth centre. It has a garage and has been freshened up with new carpets, lights and paint. The local primary school is about 600 metres away.


Private sale

Ray White, Tiffany Fraser 0451 348 787

5/48 Hood Street, Sherwood 

Brisbane’s best property buys

5/48 Hood Street, Sherwood QLD 4075 

This quirky one-bedroom rear apartment in the city’s leafy west riverside belt presents buyers with 71-square-metres including a covered timber deck with a private garden outlook. There is scope to modernise the interior, although the exposed brick walls and wood-grain kitchen cabinets are charming in their own retro-rustic way. The local primary school is diagonally a block away.


Private sale

Williams Real Estate, Nick Williams 0419 379 771

9/14 Military Close, Annerley 

Brisbane’s best property buys

9/14 Military Close, Annerley QLD 4103 

At face value, this is a screaming good deal for three levels of home less than six kilometres from the CBD. The suburb’s median sale price for a three-bedroom house is $783,000, based on 48 sales in the past 12 months. House-like in size, this 168-square-metre townhouse has access to the estate’s infinity pool and residents’ entertainment deck. Junction Park State School is about 200 metres away to the north-west.


Private sale

Place, Nick Bekker 0421 461 520 


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The coastal towns where prices have changed little in five years

Coastal towns

Property prices have been soaring across Australia’s coastal towns and suburbs, but there are still some pockets where prices have not raced ahead.

House prices have grown rapidly in many sea-change destinations in recent years, skyrocketing even further in some areas amid the pandemic and rise of remote working.

In Byron Bay on the NSW’s north coast, Sunshine Beach in Noosa, and Somers on the Mornington Penisula, median house prices have more than doubled in the space of five years.

However, growth has been more subdued in other markets, Domain data shows, with prices in some suburbs and towns near the coast still back at, or close to, their 2016 levels.

Here’s our pick of some of the markets where house hunters can get into the market at a similar price to five years ago. But be warned, house prices in many of these locations are on the rise.

Cairns, QLD

While house prices in Cairns were up 16.3 per cent over the five years to June to a median of $465,000, there are suburbs a little inland with softer price growth.

Earlville, about four kilometres south-west of the city centre, recorded a median house price of $395,000 over the year to June, up about 4.1 per cent on 2016 prices.

While further south, median prices in the neighbouring suburbs of Edmonton and Bentley Park climbed 3.9 per cent and 1.7 per cent, respectively, over the five-year period.

Coastal towns

18 Goodsell Drive, Bentley Park QLD 4869 

Selling agent Therese Plath, principal of Ray White Cairns South, said there was strong demand for affordable homes in Bentley Park and Edmonton from locals looking to upsize, interstate tree-changers and investors.

At Bentley Park’s median house price of $371,250, buyers might get a four-bedroom house with one or two bathrooms, Ms Plath said but noted buyers on such a budget were increasingly having to look at three-bedroom homes due to rising prices over the past year. Edmonton’s median now sits at $366,000.

Though not directly on the coast, Bently Park and Edmonton are within a 40-minute drive of multiple beaches and 20 minutes from the Cairns Esplanade, while Earlville is about 10 minutes closer.

West End, Townsville, QLD

Further south, but still in north Queensland, prices in Townsville’s West End are now 1.8 per cent higher than 2016 prices, after the median fell 2.4 per cent over the year to June to $351,250.

Those looking to buy at the suburb’s median house price could expect to secure a three-bedroom, one-bathroom house within a 10-minute drive of Townsville’s foreshore.

Coastal towns

1 Harold Street, West End QLD 4810

Across Townsville, the median house price is up 4.4 per cent over the past five years to $340,000.


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