ONE IN 10 AUSTRALIANS HAVE MOVED DURING THE PANDEMIC, WITH MANY LEAVING THE CAPITAL CITIES FOR GREENER PASTURES. SO WHAT DOES THAT MEAN FOR HOUSE PRICES IN 2022? A BEHAVIOURAL ECONOMIST EXPLAINS.

BY DEAN PEARSON, HEAD OF BEHAVIOURAL AND INDUSTRY ECONOMICS, NAB

COVID-19 ABRUPTLY and radically changed the way Australians do business. Given the opportunity to work remotely, it seems many Australians re-evaluated their living situation and chose to leave the big smoke behind.

Australian Bureau of Statistics data shows that capital cities had a net loss of 11,800 people in the March quarter — the largest quarterly net loss on record. There’s also been significant movement between the states. In the year prior to April 2021, Victoria lost 42,900 people, New South Wales reported a modest growth of 11,700 people (this was before the state’s extended lockdown) and Queensland gained 43,900 residents. At the same time, international border closures put a halt on overseas migration, slowing population growth to a near standstill. It remains to be seen whether this drift away from the capitals is permanent. As life returns to some sort of normality, employment opportunities and amenities in major cities may entice people to return. That said, we know that when people experience change for the better, it can be extremely difficult to persuade them to go back to something they perceive as less desirable. NAB research suggests that almost one in 10 Australians have moved within their own state or territory, or to another one, because of Covid-19 and are not planning to return. 

This presents a real opportunity for certain regional areas to become greater hubs of economic activity and to encourage more Australians to live in them long-term. That said, there may be significant challenges in terms of land use and infrastructure planning, most notably in South East Queensland. 

NAB asked those who had moved, or planned to move, what prompted their decision. Four in 10 said it was for “lifestyle” reasons (this response was particularly popular with those in South Australia and Queensland). Around three in 10 cited “wellbeing” or “employment” and just over one in four wanted to be closer to family and friends. Three in 10 of those surveyed said Covid-19 played a key role in their decision. 

Where we live can have a real impact on our wellbeing. About seven in 10 Australians told us that they currently live in an area or region they really want to be in, with four in 10 having managed to purchase property there. Queensland and Western Australia had the greatest number of people who had purchased property in their desired location; NSW had the smallest.

 According to about half of those surveyed, the most important considerations when deciding where to buy are good shopping, restaurants and other amenities, plus the size of the dwelling. Other key drivers (identified by four in 10 people) were the amount they were prepared to borrow, their ability to buy a house rather than an apartment, the size of the land and good public transport. With many now working from home, almost one in five Australians highlighted the importance of having the opportunity to live in a regional- area; the same number said that a study or work area was of value to them. Apartment living (rather than a house) was a key factor for fewer than one in 10 Australians.

The housing market has proven remarkably resilient throughout the pandemic, despite lockdowns in our two largest capitals and the sudden slowing of population growth. In part, that’s thanks to low interest rates, the federal government’s Home Builder program, a range of incentives from the state governments and a labour market that’s performed better than expected. That said, house price growth has recently eased (though it remains strong) and market activity has slowed, while construction and loan approvals have dropped.

NAB Economics has revised up slightly its forecast for dwelling prices in 2021, based on stronger-than-expected outcomes in recent months, and we’ve made a small upgrade to our expectations for the fourth quarter and early 2022. Overall, that means a strong run for house prices in 2021, but we can expect a sharp slowing in 2022 as the impact of lower interest rates fades and affordability constraints begin to bind. 

A survey conducted in the third quarter shows that the number of Australians who think now is a good time to buy a home has fallen for the third consecutive quarter, to just 25% (at the same time last year, 44% said it was a good time to buy).

Looking at individual states and territories, we see that the Australian Capital Territory and Queensland buck the trend, with 28% of those surveyed in the ACT saying that now is a good time to buy a home, compared with 24% in the second quarter; in Queensland, the figure was 26% compared with 23%. In other states, the numbers fell quite sharply, including WA (26% vs 36%), SA (25% vs 35%) and Tasmania (17% vs 25%). 

The number of respondents who thought it was a good time to buy an investment property also moderated, to 23% (down from 25% in the second quarter and 31% at the same time last year). But again, Queensland bucks the trend, with 25% believing it was a good time to buy an investment property, up from 22% in the second quarter. The number of respondents who intended to buy an investment property in the next 12 months was highest in NSW and the ACT, and lowest in Tasmania. 

Even though house price growth is expected to slow sharply next year, the number of Australians who intend to buy a home in the next 12 months has fallen slightly, to 13% (compared with 14% in the second quarter). Those intending to buy investment property is unchanged at 9%. By state, the number of people who planned to buy a home was highest in the ACT (18%), Victoria (15%) and NSW (14%), and lowest in Tasmania (6%).

Looking at the data, it seems that the pandemic has reinforced the value Australians place on their home. For many, it is not only their most significant asset, it also satisfies an innate desire for safety and security. If nothing else, the past two years have given us a chance to reassess where we want to live and what we prize most.

The information contained in this article is gathered from multiple sources believed to be reliable as of the end of October 2021 and is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, NAB recommends that you consider whether it is appropriate for your circumstances. NAB recommends that you seek independent legal, property, financial and taxation advice before acting on any information in this article. ©2021 National Australia Bank Limited ABN 12 004 044 937 AFSL and Australian Credit Licence 230686.