Australian property prices rebound from COVID slump

Since the start of the pandemic, housing prices dropped. Now some suburbs are recording huge sale profits – but they aren’t where you’d expect.

Homeowners in some parts of Australia are seeing the value of their properties jump significantly – after the pandemic saw housing prices in Sydney drop 2.9 per cent.

Buyers are turning to large blocks of land and properties close to the coast, which are the areas with typically the highest profits, while they’re turning away from high-rises and properties close to the city.

Coastal suburbs in Sydney’s northern beaches and lower north shore have shown profit margins of more than $500,000 even during an economic recession, according to a CoreLogic review of June quarter sales.

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This Torres Place house in St Ives recently sold for $2 million. It previously sold for $1.31 million in 2015.

Even though housing prices have fallen in Sydney, they are eight per cent higher than this time last year. This is fuelled by low interest rates which has ramped up competition and driven home prices upward.

Some homeowners have been reselling their properties for an average of up to $650,000 more than they paid for them a few years ago.

The average resale profit for units, townhouses and houses on Sydney’s northern beaches was $585,000 and nearly 96 per cent of sellers made money off their sale.

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Some homes are selling for around $500,000 more than they were purchased for a few years ago.

Sellers in the Sydney’s Hills district saw an average resale profit of almost $600,000, and in Ku-ring-gai council the figure was $616,000 on average. The median profit in the Willoughby council area was $652,000.

Owners in these areas typically owned the home for around seven or eight years before deciding to sell the property.

On the other hand, high-rise buildings in areas such as Parramatta and Ryde in Sydney’s west saw 16 per cent of sellers lose an average of $40,000.

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Buyers are flocking to properties along the coast while turning away from city apartments.

MILLION-DOLLAR MARKET

REA Group chief economist Nerida Conisbee said that new suburbs are cropping up on the $1 million and $2 million property market, with many of these suburbs outside popular areas in Melbourne and Sydney.

The suburbs are more likely to be mid-market, such as Melbourne’s Oakleigh East which is approaching $1 million, and Pascoe Vale South and Eltham which aren’t too far off the million-dollar mark.

The surprising new entries on the list are Lennox Head in Ballina, not too far from popular Byron Bay, highlighting the strength of the northern NSW corridor.

On the Sunshine Coast, Moffat Beach is about to hit $1 million while Sunshine Beach is set to hit the $2 million mark.

Surfers Paradise on the Gold Coast is also about to hit $2 million, and Perth is showing strength with Mount Lawley and South Fremantle about to get to $1 million pricing.

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More people are looking to buy near the coast and on larger lots.

CHANGING HABITS

Spending habits have changed since COVID-19 hit, with Australia’s household saving ratio rocketing up from 6 per cent of household incomes to around 20 per cent.

“So little demand has meant very little pressure on pricing and as a result, Australia’s CPI dropped in the June quarter,” Ms Conisbee said.

“With demand so weak, there continues to be pressure on the RBA to reduce the cash rate even further from the record low 0.25 per cent.”

She added that negative interest rates are again on the agenda globally.

“If you want people to borrow more to spend and invest, there is possibly no better incentive than to pay them to borrow money,” she added.

“Inflation is likely to remain low but the arrival of a COVID-19 vaccine, combined with very cheap and easy finance and record levels of government stimulus could provide an adrenaline shot to the economy and lead to a surge in inflation.”