Seven ways COVID changed housing trends – Part 3

Key takeaways

Once lockdowns and social distancing measures eased, labour markets tightened significantly.

Although labour markets are now loosening, RBA forecasts have the unemployment rate holding below 4.5% through to at least mid-2026.

Demographic factors have influenced housing trends. Housing demand remained strong through the pandemic despite closed borders due to a diminishment in household size.

It was four years ago when the World Health Organisation declared COVID-19 a worldwide pandemic.

Since that time economic trends, including housing metrics, have been on a roller coaster ride.

Although lockdowns and the uncertainty of vaccination programs are well behind us, the legacy of COVID will be with us for a long time yet.

This is the last of a series of 3 articles that provides a retrospective of housing and peripheral economic and demographic trends through the pandemic to date.

You can read Part 1 here and Part 2 here.

Labour markets

The onset of COVID saw labour market trends move through a significant disruption, with unemployment spiking to 7.6%, job growth plummeting deeply into negative territory and participation in the workforce falling off a cliff.

The early phase of COVID saw the federal government provide $89 billion in JobKeeper payments to around 4 million workers and 1 million businesses, as well as additional payments to JobSeeker recipients.

Without these initiatives, labour force outcomes would have been very different; the RBA estimated JobKeeper reduced total employment losses by at least 700,000 between April and July 2020.

Once lockdowns became less frequent and social distancing measures eased, labour markets tightened significantly.

• Annual job growth has held above 2% since April 2021 (apart from a brief drop due to the sixth round of lockdowns in Melbourne).

• The unemployment rate plummeted from 6% in July 2020 to 3.4% in October 2022 (rising to 4.1% in Jan 2024).

• The participation rate has held above 60% since January 2021, moving through record highs in November last year.

• The portion of workers with multiple jobs held at record highs through 2023 with 7% of workers holding more than one job.

Although labour markets are loosening a little, RBA forecasts have the unemployment rate holding below 4.5% through to at least mid-2026.

Strong labour markets have been a key factor in keeping borrowers on track with their mortgage repayments in the face of high interest rates and cost-of-living pressures, with the 90-day mortgage arrears rate holding well below 1%.

Demographic factors

An important feature of housing trends through the pandemic to date has been demographic factors.

The early phase of COVID saw population growth reduce to virtually nothing as net overseas migration turned negative between June 2020 and September 2021.

Despite the lack of population growth, housing demand was strong on the back of extremely low-interest rates, high consumer sentiment, a jump in household savings and a sharp drop in the average household size.

Regional markets saw additional demand flowing from a surge in internal migration rates, where more people were leaving the cities for regional markets and fewer regional residents were moving to the cities.

Recent data shows most of these trends are normalising, with overseas migration peaking in Q1 last year, households once again becoming larger as group households reform and internal migration reverting to more normal patterns.

Although population growth is slowing, net overseas migration looks set to remain above pre-COVID levels over the coming years, placing further pressure on housing demand.

Net overseas migration tends to have a more immediate flow-through to rental demand and a lagged flow-through to purchasing demand.

As net overseas migration slows, we should see rental conditions loosen, however, with roughly 150,000 net permanent arrivals to Australia last year, we are likely to see a demand side legacy providing some upside for purchasing demand remain for several years at least.

The portion of employees who are working from home surged through the pandemic, with upper estimates from the ABS indicating more than 50% of employees were working from home between 2020 and 2022.

Although the share of employees working remotely has reduced, it remained well above pre-COVID levels in August last year at 36.9%.

This is the third in a series of articles. You can read Part 1 here and Part 2 here.

About Tim Lawless Tim heads up the Core Logic RP Data research and analytics team, analysing real estate markets, demographics and economic trends across Australia. Visit www.corelogic.com.au