Property prices went up by 30 per cent or more in the Australian suburbs that best recovered from the global financial crisis (GFC), research by an investment group found, offering some insight into how the property market may recover after the coronavirus pandemic.
The Property Investment Professionals of Australia (PIPA) and CoreLogic analysed three years of property sales data after the GFC sent ripples throughout the market. Their analysis found property prices surged in capital cities and neighbouring areas as people entering the market took up the federal government’s first time homeowners boost.
“The recovery in the property market (in the three years after the GFC) was broad, varying from inner-city to outer-city suburbs,” Peter Koulizos said, chairman of PIPA.
“Certainly, first home buyers helped by boosting demand for new properties, whether
they were located in urban regeneration or greenfield sites.”
The report comes after the RBA, CBA and CoreLogic forecast a dip in property prices due to the economic disruption of COVID-19.
NSW suburbs dominate, but don’t take the top spot
Capital city houses and apartments increased in value by more than 30 per cent in the three years from December 2008 to 2011, the analysis found.
The top performing suburb was Rosebury in the Northern Territory, where property prices increased by 39 per cent to a median price of $418,735.
It was followed by Forde in the ACT, where median property prices recovered by 35 per cent to $490,813.
Rebounding New South Wales suburbs then dominated the remaining top ten, taking out six spots with suburbs in the city, inner west and western Sydney predominantly recovering from 33 to 31 per cent.
But a wildcard factor could influence the recovery following the coronavirus: people working from home, Mr Koulizos said.
“The way that people work will likely change significantly post-pandemic and this will have an impact on less traditional property investment locations,” he said.
“Lifestyles will undoubtedly change, which will make living outside the inner-city more appealing.
“If you don’t have to go to the CBD every day for work, because you can work from home, then you don’t have to live near it.”
Regional properties rebounded driven by the mining boom: CoreLogic
Houses and apartments in regional areas increased by as much as 65 per cent in the three years following the GFC, but many of these areas were bolstered by a strong mining industry at the time, Tim Lawless said, head of research at CoreLogic.
“Areas such as mining towns, where economic conditions are dependent on a single industry, are much more likely to experience bursts of price rises or falls because of the strength or weakness of their dominant industries,” he said.
“While many of these mining regions recorded spectacular capital gains post-GFC, a few years later many of these same regions recorded a crash in home values.”
Low interest rates, government subsidies
A suite of measures are meant to slow down the economic fallout from the coronavirus pandemic, and help different markets recover.
Interest rates on mortgages are at historically low levels after the Reserve Bank responded to the pandemic with an effective lower bound cash rate of 0.25 per cent.
Hundreds of thousands of mortgage payers were able to defer their home loan repayments if they were out of work. Banks initially offered the measure for six months, but can now extend them for a further four following instructions from financial regulators.
The Federal Government also introduced the HomeBuilder scheme, a government grant intended to fuel home purchases and renovations, while acting as a safety net for workers in the construction industry.