[+] Run to Paradise: Inside the Whitsundays Boom

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>There was no ripple of warning across its famed passage of azure waters.</p><p>Out of the blue in September last year, the Whitsundays—Queensland’s iconic archipelago of 74 tropical islands—was hit by its biggest property wave as a run to paradise began <a href="https://www.theurbandeveloper.com/articles/top-regional-growth-areas-revealed">from Australia’s Covid-gripped capital cities</a>.</p><p>At the northern end of Hamilton Island a $6-million deal was sealed, sight unseen, by a southern buyer for Lotus House, a four-bedroom hilltop residence overlooking the verdigris depths of the Coral Sea.</p><p>“It was like ‘wow, what the hell just happened?’,” says Sotheby’s Wayne Singleton, who negotiated the sale.</p><p>Not long after, another of the island’s waterfront mansions was snapped up for “just under $6 million”—also sight unseen.</p><p>“These were houses that had been on the market for a while and the next minute they’re selling for prices we hadn’t seen for years,” Singleton says.</p><p>Since then, Singleton estimates there have been a total of $130 million in property transactions on the resort island, with almost a quarter of its privately owned houses changing hands as well as a swag of apartments—including a harbour-front penthouse with a marina berth for $8.4 million.</p><p>Prices for some of the properties on “Hammo” as it is affectionately known by locals have skyrocketed by up to 30 per cent and, not surprisingly, Singleton is still shaking his head.</p><p>“It’s madness,” he says. “On average, before Covid, there were $30 million of deals a year on the island and $50 million was a good year.</p><p>“We used to sell about two to four houses per annum and, so far, there have been 23 house sales during the past 12 months. It’s just going nuts.”</p><p>He laughs when asked if there are any signs of the sales boom slowing.</p><p>“We’re actually expecting it to get even crazier when the borders open up,” he says. “I’ve got another seven contracts out at the moment just waiting to be signed—that’s unheard of.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/4e983aeb-cbd2-4c90-893c-bb4f8610449d.jpg" width="1600"/></picture><div><span style="align-content:center;opacity:0.8">▲ Lotus House on Hamilton Island was sold, sight unseen, for $6 million.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>Knocked flat by the global financial crisis and then two cyclones, in 2011 and 2017, the Whitsunday property market is back stronger than ever as a pandemic-induced boom plays out up and down the Queensland coast.</p><p>Hamilton Island chief executive Glenn Bourke says the region is in the midst of a rebirth led by the renewed focus on lifestyle and a paradigm population shift due to Covid.</p><p>“Places like the Whitsundays are definitely more front of mind now in so far as they’re not high population and they’re generally regarded as healthy pristine places where you’ve got your own space,” he says.</p><p>“I think many people, particularly from the southern states, have had a cathartic moment and want to pursue a different dream in their life.</p><p>“What was really slammed home during Covid was that the thing we were having ripped away from us was the lifestyle we enjoyed so much ... and with that has come this interest in property and people looking to access more of their available wealth to create those lifestyle experiences.</p><p>“That bodes well for the Whitsundays and other areas which were maybe only considered as holiday destinations and now are becoming more residential places and somewhere to live and enjoy those freedoms.</p><p>“Over the next five years, I expect there’ll be a fairly prosperous outlook for the Whitsundays with significant investment and amounts of development.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Bourke says while there are no major plans on the books for Hamilton Island, an exponential increase in land sales on the island is expected to spark a low-density building boom.</p><p>“Land sales in the past six months have been equivalent to land sales of the past six years ... and the inquiries are still coming in thick and fast,” he says. “The rising interest and amount of people willing to take those blocks on as a project is a real phenomenon.”</p><p>Bourke says it also aligns with the low-density development strategy that the Oatley family, who bought Hamilton Island in 2003 for about $200 million, have for the island going forward.</p><p> “They’ve done a bit of medium density in the past but they don’t have an untold desire to overdevelop the island. It’s a pristine tropical island environment so you don’t want to turn it into Hong Kong.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/4ea85aba-a1c5-4eb1-adcb-a0d2114e0168.jpg" width="1600"/></picture><div><span style="align-content:center;opacity:0.8">▲ Twiggy Forrest’s has paid $42 million for Lizard Island Resort on the Great Barrier Reef.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>Meanwhile, Australian mining billionaires Andrew “Twiggy” Forrest and Gina Rinehart are collectively poised to invest almost $100 million to acquire two of Queensland’s Island jewels to the north and south of the Whitsundays.</p><p>Forrest’s investment company Tattarang has <a href="https://www.theurbandeveloper.com/articles/twiggy-forrest-buys-lizard-island-for-42m">splashed $42 million for Lizard Island </a>and Rinehart is looking to buy Great Keppel Island for about $50 million and redevelop it.</p><p>Along with the $20-million acquisition of mothballed Long Island Resort earlier this year by Sydney <a href="https://www.theurbandeveloper.com/articles/landmark-brisbane-hotel-sells-for-50-million">hospitality kings Bill and Mario Gravanis’ Oscars Hotel Group</a>, the news has sparked speculation of a potential reboot of a number of closed resort islands left in permanent limbo by their foreign owners.</p><p>“It’s a huge shot in the arm for resort and island-based tourism, absolutely, and it will give other people confidence to invest in it,” Bourke says.</p><p>“I can only think good things will come out of it because ... if I use the Oatley family as an example, they have an altruistic view of how Hamilton Island should be and 18 years ago when they came in it was at a low point but they had the capital to inject into it and turned it into a beautiful, modern well-appointed destination.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>“So, the commercial ramifications of that altruism are that it’s a better product and it works better and you’re able to have it self-sustain.”</p><p>On Hayman Island, the Australian arm of Malaysian property giant Mulpha is ramping up the resort’s accommodation mix with the construction of 12 beachfront pavilions.</p><p>With the looming reopening of borders, it also is bracing not only for a busy holiday period but a sales rush on its upmarket 21-villa Hayman Estates project it is developing and selling off-the-plan.</p><p>“It’s amazing how many people can spend $6 million to $8 million on a holiday home,” says Mulpha sales and development manager John Hughes. “People’s attitudes have certainly shifted during Covid and they are enjoying their money now because who knows what the future holds.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/839cec61-4e78-4f95-ad06-37a1bb07769a.jpg" width="1600"/></picture><div><span style="align-content:center;opacity:0.8">▲ Development applications for the Airlie Beach region are triple the average.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>However, while the islands are basking in the surge of demand from the south, an even bigger property and development story for the Whitsundays is unfolding on the mainland at Airlie Beach and its surrounds.</p><p>Whitsunday Regional Council’s latest data shows building approvals jumped significantly in January this year and averaged 20 per month in the first half of 2021. By comparison, there were an average of only six building approvals per month in the nine months to March 2020 and that rate continued through the remainder of the year.</p><p>“Airlie has been traditionally known as a backpacker-type holiday place,” says the council’s development services director Neil McGaffin. “But I think while you will continue to see backpackers come here, Covid has thrown the cat among the pigeons and we’re now seeing a real evolution.</p><p>“We’ve had to re-do our infrastructure, economic and population projections.</p><p>“We’ve had a significant influx of purchasers from southern states ... sale of land has escalated, building has escalated and prices have escalated.</p><p>“There’s quite a few estates under construction and they’ve had strong pre-sales but we’ve got pressure on the housing sector at the moment because the stock to purchase has diminished and the stock to rent has significantly diminished.</p><p>“So, the difficulty we have is finding accommodation for workers and that’s having a flow on effect to the tourism and other sectors as far as staff.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/da3ae6f9-c9e9-4c79-a2ff-2d98679614b0.jpg" width="1600"/></picture><div><span style="align-content:center;opacity:0.8">▲ Whitsunday Green: 210 homes are being developed as part of the $60-million mixed-use project.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>The latest PRD Real Estate market update indicates that in the 12 months to June 2021 house sales soared by 121.4 per cent and apartment sales by 244 per cent. Median house prices jumped to $515,000 (up by almost 8 per cent), apartment prices to $290,000 (more than 18 per cent) and house rental prices have increased by 32 per cent.</p><p>More than $115 million worth of new projects is expected to commence across the second half of 2021 in the Whitsundays area.</p><p>In a sign of the changing times a multi-million-dollar development including a new hotel and tourist park with a pool, restaurant and beer garden is being undertaken on the site of the former Reefo’s Backpackers at Cannonvale.</p><p>Two new residential subdivisions for almost 80 lots are also under way in the surrounding area as well as the development of 210 dwellings as part of the $60-million Whitsunday Green mixed-use project.</p><p>“People have decided they are going to live a different way and are just escaping the southern states,” says PRD Whitsundays chief executive Annette O’Neil. “Queensland has become quite aspirational for people and, particularly as a regional and coastal area, we have really benefited from that.”</p><p>O’Neil says the Whitsundays is soaking up “the best times we have seen here for a very long time” and with some significant developments already in the pipeline and an increasing number of developers looking for sites in the area there may be “bigger things to come”.</p><p>But she is remaining cautiously optimistic.</p><p>“The biggest issue is a lot of the developments are not shovel ready and it’ll be interesting to see if it all lasts long enough for them to turn dirt and come to fruition.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/c3737bff-63b4-4421-8d65-fedc9636e576.jpg" width="1600"/></picture><div><span style="align-content:center;opacity:0.8">▲ The 12-lot development One Airlie next to the Whitsunday Sailing Club has sold out during the past six months.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>Veteran Queensland developer Kevin Seymour believes the region’s boom has at least two to three more years to run yet.</p><p>“The fact is I’ve never seen as much money in the market along the coast in north Queensland. The market is awash with money,” he says.</p><p>During the past two decades his Brisbane-based Seymour Group, one of Australia’s largest private developers, has undertaken a handful of projects on the Whitsunday mainland.</p><p>Its latest venture, One Airlie—a waterfront gated subdivision of 12 allotments next to the Whitsunday Sailing Club—sold out during the past six months with blocks ranging from $1.3 million to $2.6 million.</p><p>“There’s a different class of buyer now coming into Airlie Beach to what there was,” Seymour says. “There’s a lot of wealthy buyers coming in and building magnificent homes and that’s changing the demographic and atmosphere quite a bit.</p><p>“The bones for the development of the place are extremely good and I think the time is right now. If you look at the strength of not only Airlie Beach but Cannonvale ... it’s quite substantial now and there’s a lot of depth in that market.”</p><p>Sydney-based developer John Zappia is no doubt hoping Seymour is right.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/f81b3bbc-3e26-49c7-a9df-d6941b96d38e.jpg" width="1600"/></picture><div><span style="align-content:center;opacity:0.8">▲ An artist’s impression of the proposed One Whitsunday development that’s been in the works since 2007.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>Back in 2007, he swooped on an elevated 1.01ha development site at Shingley Drive, Airlie Beach, previously earmarked for a “mega-luxurious” apartment project by socialite and former US president Donald Trump’s ex-wife, Ivana Trump.</p><p>Zappia has been battling to get his $80-million One Whitsunday high-rise resort development off the ground ever since and is set to lodge his latest revised plans for the project with a “toned down” design and its height reduced by four levels.</p><p>“I’m not a Gina Rinehart or a Twiggy Forrest, I’m just a Joe Blow from Sydney who took a big punt and I’ve managed to survive this far and I want to see it through,” he says.</p><p>“I’ve burnt a lot of money on this but I believe in Airlie Beach and the Whitsundays and I’m still committed to making this development work because I think it works for the area and the whole region.”</p><p>Meanwhile, the forces of change in the Whitsundays are clearly at work on the streets of Airlie Beach.</p><p>“Most of your locals don’t wear shoes but you’ve got some pretty smartly dressed people in town so you know they’ve only just moved up,” Sotheby’s Wayne Singleton says.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>You are currently experiencing </strong><em><strong>The Urban Developer</strong></em><strong> Plus (TUD+), our premium membership for property professionals. </strong><a href="https://www.theurbandeveloper.com/membership-plans"><strong>Click here to learn more.</strong></a></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/4fb872c4-2507-449c-af93-4c928c2ed849.png" width="800"/></picture><div></div></div></div></div></div></div></div>

Coral reefs, sandy beaches, yachts and cocktails—now you can add a major property boom to what Queensland’ Whitsundays are all about…

The Queensland government has unlocked nearly 50,000 lots between the Gold Coast and Sunshine Coast as population growth pushes up demand.

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>The Queensland government has unlocked nearly 50,000 lots between the Gold Coast and Sunshine Coast as population growth pushes up demand.</p><p>Land supply was part of the state’s Covid economic recovery plan to provide jobs as property prices continue to surge across the region. </p><p>Funding was also allocated for infrastructure including roads, sewage works and schools for the new lots near Redland, Moreton Bay, Logan and out to Ripley Valley.</p><p>Minister for state development Steven Miles said the team were <a href="https://www.theurbandeveloper.com/articles/queensland-rushes-to-meet-land-demand">focusing </a>on Brisbane, Redland, Sunshine Coast and the Gold Coast for other future sites.</p><p><strong>Residential lots unlocked since November 2020</strong></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><table><thead><tr><th>Location</th><th>Lots</th><th>Additional funding</th></tr></thead><tbody><tr><th>Greater Flagstone</th><th>27,000 lots</th><th>$31 million from Catalyst Infrastructure Fund for critical road infrastructure</th></tr><tr><th>Ripley Valley</th><th>5,600 lots</th><th>$5.91 million from Catalyst Infrastructure Fund for critical road infrastructure</th></tr><tr><th>Southern Redland Bay</th><th>5,000 lots</th><th>$15 million from Building Acceleration Fund for a new wastewater management plant</th></tr><tr><th>Caloundra South</th><th>3,091 lots</th><th>-</th></tr><tr><th>Caboolture West</th><th>3,000 lots</th><th>$10.5 million from Building Acceleration Fund for water supply and sewage infrastructure</th></tr><tr><th>Yarrabilba </th><th>2,000 lots</th><th>$15 million from Building Acceleration Fund for infrastructure for primary school site and roads</th></tr><tr><th>Bahr’s Scrub</th><th>1,700 lots</th><th>$15 million from Building Acceleration Fund to improve access and transport efficiency</th></tr></tbody></table></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><sup><sub>^Source: Queensland Government</sub></sup></p><p>“Our strong health response to the Covid-19 pandemic has created a spike in interstate migration which has put pressure on land supply across the state,” Miles said.</p><p>“Greater Flagstone and Ripley Valley are both expected to be home to around 120,000 people so it’s important we have the right infrastructure in place to support that growth.”</p><p>The Growth Areas Team announced a pilot site for land supply in March, <a href="https://www.theurbandeveloper.com/articles/stockland-qld-pilot-suburb-caboolture-west">identifying </a>Caboolture West as Queensland’s newest suburb.</p><p>The 2032 Olympics and Paralympic Games in Brisbane is expected to further stimulate population growth and the <a href="https://www.theurbandeveloper.com/articles/olympic-games-brisbane-property">property demand</a>.</p><p>Pacific International Development Corporation director Stephen Harrison said they were working on the Flinders Lakes development at Greater Flagstone.</p><p>“It will also result in the acceleration of significant investment by the private sector to complement the road construction works,” Harrison said.  </p><p>“We’re keen to continue to work with the Queensland Government and Logan City Council to deliver world-class master-planned communities that will promote Queensland’s lifestyle nationally and internationally.”</p><p>The development includes 21,450 homes in the foothills of Flinders Peak along with schools, colleges and university campuses.</p></div></div></div></div></div>

The demand for land in South East Queensland is ramping up as 50,000 lots are unlocked by the state government to keep up with the population surge...

Scentre Group CEO wants Covid vaccines to be administered in shopping centres as recurrent lockdowns impact the retail sector.

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Scentre Group chief executive Peter Allen wants vaccines to be administered in shopping centres as reoccurring lockdowns drag down the retail sector.</p><p>Allen, who is also the chair of the Shopping Centre Council of Australia, reiterated the council&#x27;s standing offer to support the vaccine rollout it made earlier this year.</p><p>Retail trade suffered in Victoria during the lockdown in May, according to the Australian Bureau of Statistics, and shutdowns in other states are expected to impact next month’s data.</p><p>So far more than 8.7 million vaccine doses have been administered, with 30 per cent of adults receiving their first dose.</p><p>However, this was a fair way from the yet-to-be determined thresholds required to move the country out of regular lockdowns for phase B of a four-phase national Covid-19 response.</p><p>Allen said they were willing to assist the government with the vaccination rollout across the country.</p><p>“Shopping centres provide safe and convenient locations for the community, with approximately nine out of 10 people living within a 20km radius of an SCCA-owned shopping centre, and more than 70 per cent of the population within 5kms,” Allen said.</p><p>“As retail is Australia’s largest private sector employer, shopping centres are also substantial employment hubs and could provide a safe vaccination location for retail and other workers at each centre.”</p><p>Despite the effects of lockdown on the sector, the outlook for Australian retail real estate investment trusts was stabilising, according to S&amp;P Global. </p><p>The revised outlook rated the majority of REITS as stable “reflecting their ability to weather the Covid-19 pandemic and maintain a buffer to absorb further disruptions” according to the report.</p><p>However, disruptions to trade were likely to continue, with the long-term easing of restrictions only available in phase B of the national pandemic response, and lockdown elimination outlined in phase C.</p><p>The National Cabinet’s task force was conducting scientific modelling to identify the trigger points for stage B, which at this point is expected to exceed 60 per cent of adults being fully vaccinated.</p></div></div></div></div></div>

Scentre Group chief executive Peter Allen wants vaccines to be administered in shopping centres as reoccurring lockdowns impact the retail sector...

Australian house prices hit record highs along the east coast, marking the steepest increase in four years and rounding out a year of unprecedented events and price predictions.

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Australian house prices hit record highs along the east coast, marking the steepest increase in four years and rounding out a year of unprecedented events and price predictions. </p><p>The median house value now sits at $852,940, up 4.1 per cent over the quarter and 5.8 per cent in the year according to Domain’s house price report. </p><p>Sydney, Hobart and Melbourne led the charge in the quarterly results while Brisbane made a modest improvement but was up 5.6 per cent in the year.</p><p>Meanwhile unit prices rose marginally over the quarter—with only Melbourne and Canberra seeing significant growth—but could hit new highs in the coming months according to Domain analysts. </p><p>This is a far cry from early pandemic predictions including a 7 to 15 per cent fall <a href="https://theurbandeveloper.com/articles/reserve-bank-house-prices-coronavirus">predicted </a>by the Reserve Bank in the first half of 2020.</p><p><strong>Australian house prices hit new records</strong></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><table><thead><tr><th>City</th><th>Dec 20</th><th>Sep 20</th><th>Dec 19</th><th>QoQ</th><th>YoY</th></tr></thead><tbody><tr><th>Sydney</th><th>$1,211,488</th><th>$1,156,090</th><th>$1,135,482</th><th>4.8%</th><th>6.7%</th></tr><tr><th>Melbourne</th><th>$936,073</th><th>$888,985</th><th>$900,940</th><th>5.3%</th><th>3.9%</th></tr><tr><th>Brisbane</th><th>$616,387</th><th>$611,606</th><th>$583,477</th><th>0.8%</th><th>5.6%</th></tr><tr><th>Adelaide</th><th>$574,264</th><th>$562,656</th><th>$541,022</th><th>2.1%</th><th>6.1%</th></tr><tr><th>Canberra</th><th>$855,530</th><th>$804,120</th><th>$784,459</th><th>6.4%</th><th>9.1%</th></tr><tr><th>Perth</th><th>$563,214</th><th>$546,560</th><th>$528,783</th><th>3.0%</th><th>6.3%</th></tr><tr><th>Hobart</th><th>$564,091</th><th>$531,594</th><th>$501,699</th><th>6.1%</th><th>12.4%</th></tr><tr><th>Darwin</th><th>$533,845</th><th>$521,712</th><th>$515,213</th><th>2.3%</th><th>3.6%</th></tr><tr><th>National</th><th>$852,940</th><th>$819,112</th><th>$806,360</th><th>4.1%</th><th>5.8%</th></tr></tbody></table></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><sup><sub>^Source: Domain House Price Report, December quarter 2020</sub></sup></p><p>House prices across all capital cities are now at new peaks, apart from Darwin and Perth.</p><p>Domain senior research analyst Nicola Powell said the pessimistic outlook for property prices failed to materialise.</p><p>“House prices [in Sydney] finished the year 6.7 per cent higher than the previous year, although the pace of annual growth is roughly half that of earlier in the year,” Powell said.</p><p>“The rebound highlights the resilience of Sydney’s house values following a short-lived 2.2 per cent dip mid-year.</p><p>Powell said record low interest rates, the containment of Covid and stimulus packages all played a role in supporting market activity and prices.</p><p>The report also shows outer-city regions across the country saw record price growth as demand rose throughout the pandemic.</p><p>The Blue Mountains and Central Coast in NSW, the Mornington Peninsula in Victoria and Queensland’s Gold Coast and Sunshine Coast all recorded strong house price growth between December 2019 to December 2020. </p></div></div></div></div></div>

Australian house prices hit record highs along the east coast, marking the steepest increase in four years and rounding out 2020...

A few factors may explain the relative stability in house prices in Australia keeping the market from crashing...

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>It has been a devastating year for many households and small businesses as Australia moves through its first recession in more than 28 years.</p><p>ABS payroll data suggests wages are down 4.3 per cent between Australia’s 100th case of Covid on 14 March 14, and 31 October and payroll jobs decreased 3.0 per cent.</p><p>At the onset of the pandemic, consensus seemed to be building that the national decline in property values could reach 10 per cent, with worst-case scenarios suggesting prices could fall by as much as a third.</p><p>But between March and October, Australian home values have fallen just 1.7 per cent and October marked a 0.4 per cent increase in values, with the trend over November suggesting a further acceleration in growth.</p><p>Although housing values are once again rising, it’s important to highlight that Melbourne housing values remain around 5.4 per cent below their recent high.</p><p>Sydney housing values are still 4.8 per cent below their 2017 peak and values in Perth and Darwin are more than 20 per cent below their 2014 peaks, while the remaining capital cities have seen housing values move to new record highs through the Covid period.</p><p>As Australia enters the start of a gradual recovery from the largest economic downturn since the 1930’s, how can this be reconciled with such a mild downturn in property values? </p><p>A few factors that may explain the relative stability in housing, at a high level, are put forward below.</p><h2><strong>Low-cost debt</strong></h2><p>The cost of borrowing money is probably one of the most important factors influencing property values. </p><p>Over 2020, the RBA have reduced the official cash rate target (which influences lending rates) by 65 basis points, to 0.1 per cent.</p><p>In a bid to stimulate economic activity, the reduced cash rate has lowered bank funding costs, leading to record low mortgage rates. </p><p>This relationship has held up historically, with RBA research previously suggesting that a 100 basis point reduction in the cash rate can lead to an 8 per cent increase in property values over the following two years.</p><p><strong>RBA cash rate v monthly change in national dwelling values</strong></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/393cee92-56c5-4896-b068-b92d05a1bf39.jpg" width="800"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><sup><sub>^Source: RBA, Corelogic</sub></sup></p><p>In fact, it is not uncommon for housing markets to increase in value during negative economic shocks, or periods of rising unemployment. </p><p>This is because the monetary response to rising unemployment and falling consumption, is often to lower the price of debt. </p><p>Those that still have a secure income during these shocks may be more inclined to borrow and buy as a result.</p><h2><strong>Mortgage repayment deferrals</strong></h2><p>The Australian household debt to income ratio is an eye-watering 185 per cent. </p><p>This high level of debt is a vulnerability amid severe economic contractions, because sudden job loss reduces the ability of households to service this debt. </p><p>In the April Financial Stability Review, the RBA highlighted that each 100 basis point increase in the unemployment rate could lead to an 80 basis point increase in the portion of mortgages in arrears.</p><p>In the case of large-scale mortgage debt, ongoing arrears can lead to forced sales, which in turn fuel risks associated with higher supply in the housing market, lowers values, and higher rates of negative equity, where the borrower sells their property for less than what they owe the bank.</p><p>Mortgage repayment deferrals have acted as a temporary stopper on this vicious cycle. </p><p>Those that did not want to sell amid economic uncertainty due to an inability to repay their mortgage, did not have to. </p><p>This may have contributed to very low levels of stock throughout 2020, which only reduced further amid stage 2 restrictions from March. </p><p>The low level of stock on market likely helped to insulate dwelling values during this time.</p><p><strong>Number of total listings</strong></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/63f5bf88-9324-457c-af1a-114267bac96d.jpg" width="800"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><sup><sub>^Source: Corelogic</sub></sup></p><p>The April Financial Stability Review also noted that over half of owner-occupiers with a mortgage had at least three months of pre-payments on their mortgage. </p><p>Indebted households are further supported by the record-low cash rate, which is lowering the cost of servicing debt as incomes have fallen.</p><p>APRA data on loan deferrals show borrowers are becoming less dependent on these policies. </p><p>As jobs and incomes slowly recover across the economy, the portion of housing loans deferred has come down from a peak of 11 per cent in May, to 7 per cent in September. </p><p>More recent updates from lenders indicate the number of mortgages on deferral arrangements fell sharply through October and November.</p><p>Continued leniency for mortgage repayment deferral, particularly for owner-occupiers, is in the interest of the banking sector, and extends the “bridge to recovery” as the economy gradually recovers.</p><p>It is worth noting indebted households do ultimately pay for mortgage repayment “holidays”. </p><p>With unpaid interest capitalising on their loans, these households will be further indebted down the line, which may constrain their future consumption, particularly in the event of another shock to the economy. </p><p>For now, however, it is a policy which has helped to stave off further deterioration in housing markets.</p><h2><strong>This economic downturn was different</strong></h2><p>A third, important factor that may have insulated parts of the housing market is the specific nature of the economic downturn.</p><p>Severe job loss across hospitality, tourism and the arts resulted from the purposeful slowdown of “social consumption”.</p><p><strong>Change in payroll jobs</strong></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/ed8b6509-0ed4-4a0b-83e9-8ed471ceab2d.jpg" width="800"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><sup><sub>^Source: ABS, 14 March to 31 October</sub></sup></p><p>Those working in food and accommodation and arts and recreation, have seen devastating job loss through the pandemic. </p><p>However, those working in this industry are less likely to have mortgage debt.</p><p>The decline of employment in these sectors likely contributed to severe pockets of rental income decline, but the investor servicing debt may be able to hold on to the asset while it is temporarily vacant.</p><p>It is worth noting that prolonged declines in rental markets do ultimately pose risk to values. </p><p>An example is Inner-city Melbourne, which has high exposure to rental demand from overseas migrants. </p><p>Median asking rent values across the Melbourne SA2 market have fallen 24.2 per cent between March and October. </p><p>This highlights re-opening international travel and migration as a key part of bolstering rental income from property.</p><h2><strong>Housing markets did not hold up everywhere</strong></h2><p>These aforementioned factors may have contributed to stability in the housing market at an aggregate level in the face of Covid.</p><p>The many markets that make up the Australian property market still add complexity in evaluating its performance. </p><p>There have in fact been significant corrections in property values since March, such as in the inner-east of Melbourne, which fell -9.6 per cent in value over the period. </p><p>Covid has affected property markets, but severe loss in housing values has so far been contained.</p><p>Looking forward, despite further reductions in fiscal support, dwelling values are likely to continue rising off the back of the November cash rate reduction, converging with a recovery in consumer sentiment and economic conditions. </p><p>A strong institutional response and the manufactured nature of the current downturn has moderated the impact of Covid on the housing market, and would be further buoyed by the ongoing containment of the virus.</p></div></div></div></div></div>

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