Real estate is one of the largest sources of wealth among the Aussies
It is said that the wealthiest make money through this market alone. Due to this reason, the real estate market has received the most attention from investors and even the government. Even amidst COVID-19, this industry flourished, and its prices touched a record high.
Every sector of the world came under impact due to COVID-19, and so did the Australian real estate sector. Besides the pricing, the coronavirus outbreak has led to the solidification of three trends; digitization, the transformation of retail, and the rise of ESG-oriented practices.
The Rise in Real Estate Property Pricing
Property affordability in Australia, since the 1990s, has transitioned into a chronic problem from being a periodic cyclic concern. As per AMP Capital, over the last two decades, real estate property prices have risen by 200% compared to just an 82% increase in wages.
Aussies were already struggling to own properties in this country; the outbreak of coronavirus just made things worse. While most of the reputable forecasters in the country were firmly standing by their predictions, ‘property prices are going to fall, and home values are going to improve,’ the reality came as a huge blow.
Australia’s property boom is on a surge, and COVID-19 has only amplified it. It has pushed the average prices to the highest, including a rise of 23% over the long-term trend in the prices of residential properties. (Source: AMP Capital, Bloomberg) While the industries across the world were crumbling under the pandemic, the Australian real estate sector was on its way to touching record high numbers.
According to CoreLogic, residential property prices rose by 20% after imposing strict lockdowns.
As per KPMG, a rise in real estate properties was expected, irrespective of the pandemic. As per the report, the real estate market was to experience a cyclical upswing, but COVID-19 disrupted this completely. The report also states, “The rises in residential property prices have been greater than we estimate would have occurred in the counterfactual no-COVID-19 scenario.”
Factors in Play
Multiple factors have led the real estate market in Australia to experience record-high prices.
The most common ones include:
- The limited job market
- The introduction of home-buyer incentives by the government
- Low mortgage rates
- The typical fear-of-Missing-Out
Due to these factors, house prices rose by 2.8% in March, and this rise has been marked as a 32-year high. Even the KPMG report supported this rise, and it stated that the property investors and buyers would pay more than average.
By 2023, Sydney is expected to experience a 13% growth in the prices, with locals paying $125,000 more than the average value.
While the prices are increasing, the record-low mortgage rates are helping create a balance. Many people are choosing to invest in real estate. Due to COVID-19, many businesses embraced work-from-home and virtual working models. Due to Australia’s real estate market being a slow responder to integrating technology, it will take some time for the industry to integrate digital solutions into its business model and operations.
Digitization Across the Sector
The world was already under the strong influence of technology, the spread of the pandemic has only convinced the world of its power. Even though the Australian real estate sector lagged behind its global competitors, it now embraces technology.
KPMG, in its report Real Estate in the New Reality, stated, “The impacts of COVID-19 will change the demand for office space as employees and employers embrace virtual working.”
The real estate sector has not been severely impacted because of how digital property management solutions are helping. Due to digitalization, the market is significantly benefitting from fluid movement and flex spaces within different locations.
The rise in PropTech is expected but at a slow pace. Even after struggling through COVID-19, the country’s technology adoption is comparatively slow. Technologies such as property intelligence, email marketing, property management, property network platforms make it easy to oversee the functioning of a real estate business. In addition to this, there are price prediction platforms based on predictive analytics that help by providing accurate predictions of property prices.
The Focus on ESG
Another factor of change observed across the real estate sector in Australia is the acceptance of ESG-friendly strategies. The real estate businesses are now adopting strategies that link environment, society, good governance, and profit. It is a significant step towards helping the country build a green economy.
The impact that COVID-19 had on different sectors has pushed stable sectors, such as real estate, to reconsider their strategies and business models. It is an attempt to recover from the impact of the pandemic. As per the results of a poll carried out by KPMG, with such strategies, it would, as per popular belief, take a year to recover from the COVID-19 impact.
Australian Real Estate Market Continues to Stand Firmly
Despite lagging behind its competitors based on technology, the Australian real estate market has proved to stand firmly even during the crisis as serious as COVID-19. While people across the world say that their real estate sector is booming, despite the pandemic, it can be said that the Australian real estate market is booming because of this outbreak.
The increase in real estate prices has slowed down, but it has not stopped. In addition to this, the pandemic has helped the businesses operating in this market to reconsider their strategies and base them on ESG. It will instill trust in the hearts of the people and contribute to a stable future.