Since June, Australia has officially been in a recession – the first in 29 years – brought on by COVID-19 restrictions. Unemployment is up, spending is down and businesses are firing, instead of hiring.

It was predicted that housing prices would plummet during CODVID-19 and the resuting recession, but in fact the opposite has happened and in every capital city, except Darwin, prices are now higher than they were a year ago.

Realestate.com.au have identified some reasons why housing is booming, despite the recession.

1. Banks are being supportive

Often during a recession, people lose their jobs and can’t make their mortgage payments, which leads to distressed sales. However, during COVID-19, many banks have offered mortgage payment freezes, which has allowed homeowners to stay afloat and prevented property price declines.

2. The risk is concentrated to certain areas

Realestate.com.au says that only 10 suburbs in the country are showing real signs of risk, due to their high exposure to renters and close locations to universities. They are areas where young people live and work, who are now scrambling to reduce their costs of living, as unemployment climbs. These suburbs are all around Sydney and Melbourne, plus Adelaide.

3. Parts of the economy are doing well

Sectors such as mining are performing extremely well, giving Western Australia and Queensland a big boost. Likewise, strong employment in the federal government is propping up Canberra. As a result, Perth is experiencing strong buyer demand, Queenslanders are the most confident buyers and sellers in Australia, and Canberra house prices have grown every month since March.

4. Employed people aren’t spending as much

While well-paid, white-collar workers have generally escaped job losses, they are feeling nervous and as such, are saving more of their disposable income. This means conditions are safer for premium property markets, where we are still seeing price growth despite the pandemic. Our region here in northern NSW is a good example of this, where many have stayed employed and housing prices are continuing to grow.

5. Stimulus is helping

Government stimulus such as JobKeeper are helping to keep house prices steady, by reducing the unemployment rate and stablising banks. Policies targeting home buyers such as the 5% home loan deposit scheme, state government first-home buyer incentives and the recent HomeBuilder grants are also ensuring high housing demand.

What’s next? 

The biggest threat to house prices is the potential withdrawal of support from the banks, along with rising unemployment rates and completion of government stimulus.

If you are thinking of selling, now is the time. Prices currently far outweigh what was predicted or expected, but who knows what the future holds?

If you would like a free appraisal on your property, either to sell or rent, contact us for a no-obligation expert opinion.