Queensland House Prices Are Out Of Control
Is COVID Killing the Market?
During times of crisis, housing prices often skyrocket. Considering all the talk that went on around the idea of COVID’s effect on the housing market, one wouldn’t be surprised to find out that COVID has been a large driver in a jump in prices in Queensland. While the state has seen enormous price-jumps, the answer might be more complicated.
It’s Just a COVID Thing- Or Is It?
COVID turned global societies upside down when it was declared a public health emergency by the WHO in July of 2020. Prices on such items as meat, cleaning supplies, and even toilet paper skyrocketed due to a jump in demand.
Considering how impactful COVID was, many began to anticipate changes in the housing market. What they got, however, was somewhat off the mark for what was expected. A combination of factors had brewed together under just the right conditions to make the housing market do something extraordinary in most places.
It stayed stagnant.
According to the Federal Reserve Bank of Saint Louis, the panic around coronavirus in early 2020 did not lead to a jump in housing prices in the places it considered. Instead, low supply and low mortgage rates coalesced to keep the market placid instead of uproarious.
But, that’s just what was observed in the United States. Being on the opposite side of the world, it would make sense that things would be quite different for Aussies.
Instead of staying stagnant, housing prices in Queensland as of late have jumped, and to a shocking degree. As the market roiled, some began to suspect that COVID may have been the driver.
The answer? It’s more complicated. According to ABC news, the north of Queensland saw a 6.2% increase in housing prices over the span of 12 months. While the jump is noticeable, the same organization speculated that what’s causing the spike may not be COVID-19 but something very different- internal migration.
At the moment, Queensland is one of those places in Australia where internal migration is very strong. By this, we mean lots of Aussies are coming from other parts of Australia to live in Queensland. This is keeping housing prices rising.
So, while many suspected that COVID would kill the market, it may be that the movement of people within Australia is keeping the Queensland housing market booming. With more people coming in, demand is going up and thus, prices are rising. So, what we expected out of this pandemic just hasn’t panned out.
But, how can we push the enormous economic blow COVID dealt out of our heads entirely? It flipped markets on their heads all across the globe and caused one of the most painful economic contractions in recent history- so why hasn’t the housing market felt it yet? Is COVID a housing market killer? Or will it remain benign?
For this, we have to ask ourselves how housing prices have reacted to economic conditions in the past, and determine whether the tangential path the housing market took is just the first stage in a long process of reaction.
Something Wicked This Way Comes?
According to the University of Melbourne’s Faculty of Business and Economics, housing prices take a whole lot longer to reflect global trends. With things like stocks and bonds, the ripples of COVID-19 could be seen almost immediately. Housing, though, will take a little longer to see its effects.
Stocks and bonds are much more fluid than housing. The purchase of processing a stock can take mere seconds and is often conducted by experienced professionals. In contrast, houses and real estate take a much longer time to go from hand to hand. This factor and others mean that housing will have delayed reactions economically.
The results of the pandemic, however, are likely not far off. While prices remain on the rise in Queensland, and remain where they are in others, the housing market is not a difficult animal to predict. Something big is likely coming.
Increase of Demand
According to the University of Melbourne, housing prices are not going to keep growing for long. The processes we’re observing now- high demand and high price growth- can only continue for so long. In fact, they may be flipped on their heads in due time.
The University’s projections tell us that property prices across all of Australia’s capital cities are likely to fall by 4.4%over the June quarter. This is in stark contrast to the enormous rises Queensland property saw in recent months.
Luckily, prices in Brisbane are likely to experience a less sharp drop off, meaning that the market in Queensland may not be hit so hard as in the rest of the nation.
Still, what this spells for the housing market is pretty grim. As the housing market adjusts to changes in the global market, having its delayed reactions, we’re likely to see the consequences of COVID come about in full force. Prices, which have remained high and growing as of late, will see their day for struggling come.
While the recent growth in prices may be adequately explained, at least in part, by internal migration, other factors have been having their influence on housing prices.
Many are quick to attribute rises in housing prices to a disparity between the number of dwellings and households. In essence, some believe there aren’t enough houses.
But, according to ABC, the issue might not be so clear cut. Wages and rent have had a hand in the rising prices, as well, creating a situation where the number of places to live in has increased with the demand, but the number of places to own has not.
While this may seem like a small pushing factor, we have to remember that in economics, each little piece counts. COVID, movement of people, and wages and rents all play a little role. So, is COVID killing the market? It looks like the answer as of yet is- no. But figures are looking glum.