Pandemic could improve affordability

One of the silver linings of the coronavirus pandemic – at least for buyers– might be the impact it has on housing affordability.

The nation’s housing affordability challenge has been a combined function of a booming population and a lack of supply.

Since 2006, annual population growth has averaged about 150,000 people above what it was over the decade from the mid-1990s to the mid-2000s. Meanwhile, any advantage from cyclical dips in house prices has been negated by supply shortages.

“The coronavirus shock has the potential to change this dynamic of cyclical fluctuations around ongoing poor affordability,” says AMP chief economist Shane Oliver. “It has already triggered a renewed downturn in property prices with capital city prices down 2% on average since April, with Melbourne prices down around 4%.

While JobKeeper and bank repayment holidays have cushioned falls, “further declines in national prices are likely, as high unemployment, the depressed rental market and the collapse in immigration impact.”

Moreover, Oliver believes that the downward pressure on the property market from the pandemic will be long-lasting, rather than another cyclical dip, for three reasons: the depth and breadth of the economic damage; the unprecedented hit to immigration and its effect on demand; and the trend towards working from home, which could in turn drive people away from city centres as they demand homes that can double as offices.