COVID-19 Recovery

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Expert Observer

The COVID-19 pandemic has created widespread isolation throughout our communities. People are feeling increasingly disconnected from not only their physical surroundings but also their social ties. This has only been exacerbated by the looming uncertainty around job and financial security, continuous changes to restrictions and surprise cases emerging when we all least expected them. 

However, one thing is for certain in these times: That nothing is certain. Many of us are looking for the light at the end of the pandemic tunnel, where some form of normalcy is restored. Many of us are also disillusioned to this beacon of hope, coming to terms with the new reality we find ourselves in presently.

Our collective resiliency as a nation is entering recovery mode, with the enduring Australian spirit guiding us through the challenges of the pandemic. The repeated blows dealt by the pandemic have been felt the hardest in our communities where our ability to live, work and socialise has been severely impacted. Our relationships and connections within our communities have been challenged  during these trying times. As restrictions continue to ease, more than half of us think this will have a positive effect on our relationships. 

According to the ABS, one in 11 people think that life will never return to normal. With this frightening insight into the new Australian mindset, one space where we need to focus on to secure strong economic and social recovery is at our communities and their citizens. 

<h2>Citizens as local experts for guidance on fostering a modern day community</h2>

As Australian cities look towards economic recovery in the new post COVID-19 world, it is now more important than ever to recognise the important role that strong and resilient communities play in driving growth and connectedness. These are the backbone of our economy and social frameworks. A highly functioning community with involved and committed members is one that that will drive growth. 

These types of community tend to thrive more in ‘people-first places’, where it is less about what is built and more about what the community can be and will become in the future. These places go beyond green belts and access to transport to consider the broader wellbeing of a community. Social cohesion, promotion of healthy lifestyles and addressing digital needs are strongly taken into account and considered throughout the planning process. 

This development ideology is well and truly embedded throughout EG’s ‘Build In Good’ (B.I.G) development philosophy. These developments create a new category in residential living focused on social impact. People-first locations with a community spirit, spaces to meet and relax, multiple housing options for long-term living and a technology-led environment that enables convenience and connection are all at the heart of these B.I.G developments. 

The Flour Mill at Summer Hill, a real-life example of this B.I.G philosophy brought to life, is quickly becoming a thriving community with the guiding vision to build a neighbourhood that was caring and inclusive, an environment that ensured connectivity, fostered physical, mental, and emotional health and wellbeing. Well connected by heavy and light rail, boasting community gardens, public park with an established tree canopy, this is a people-first place that champions and reflects the needs of the community that inhabit it. It’s popular fortnightly Flour Mill Markets were recently named among the best in the Inner West.  

<h2>Social planning and community empowerment</h2>

So how can developers work towards futureproofing our built communities so they can grow in our new post COVID-19 reality? It begins and ends with the people that make these new communities. Drawing upon their knowledge, experiences and expertise as locals for guidance. This starts with extensive community consultation, to fully understand the real needs that impact citizens in their day to day lives. This consultation process and continued community engagement (with existing and incoming residents) helped ensure that the development at the Flour Mill delivered on the promise of building a home which honored the footprint and history of the building and industry that came before them. 

Going back to the basics of community and social planning is key, especially as we navigate our way through these trying and uncertain times. Co-creation between key community members and developers should be heavily encouraged and supported throughout the planning process. This close collaboration allows communities to voice their needs from the outset and promotes a healthy working relationship with the developers crafting the physical components of the planned community. The co-creation process indirectly also further establishes these burgeoning communal connections that will continue to thrive and prosper well after the ribbon cutting ceremony. Staying to foster neighbourly connection is what distinguishes a development from a community.

Creating a connected community begins with the intentional decisions we make in our day-to-day relationships. Connection is the foundation on which we build everything else. And as we build this connected life, we make it possible to build a more connected world, where we create neighbourhoods and workplaces that support and connect us all. 

Now more than ever before, our connections have been tested thanks to the pandemic. It is now time to focus our energy and efforts into forming strong communal ties, that will outlast the most trying of times. As activist Wael Ghonim once said, “The power of the people is much stronger than the people in power”. For me, these words have never run truer than in our new reality as we all look to recovering and healing, together. 

David Workman, Divisional Director – Urban and Community Planning, EG
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Joel Robinson

Establishing connected communities in a post COVID-19 world

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EXPERT OBSERVER

Housing market data has shown a fairly strong post-COVID recovery trend following a short, sharp slowdown in activity through the middle of 2020. Australian housing values rose 2.3% in the final quarter of the year, trending higher from a recent low in September 2020, to be just 0.1% below the previous record high value in October 2017.

Data from CoreLogic reveals which housing markets have seen the highest value increases relative to their value at March 2020.

March 2020 is a good yardstick for measuring the impact of COVID on housing markets. That is because it encompasses the ‘start’ of COVID in Australia, when the country reached the milestone of 100 cases diagnosed, and subsequently stage 2 restrictions rolled out nationally.

At the capital city level, Melbourne, Sydney, Perth, Brisbane and Hobart saw some level of value falls close to the onset of COVID. By December however, Perth, Brisbane and Hobart housing values had surpassed their March 2020 highs. Home values across Darwin, the ACT and Adelaide have continually increased since March, with Darwin values up 8.3% since the onset of the pandemic.

<img alt="" height="716" src="https://s3-ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/pictures/article-images/corelogic_dwelling_value_changes.jpg" width="1200">

Of the 116 LGA markets analysed, 95 saw some level of decline in values since the onset of COVID. Of those 95 markets, 37 have recovered to value levels above March.

Some of the strongest value increases since March are located in areas that did see a COVID-induced decline including Kwinana in Perth( up8.7%), Burnside in Adelaide( up 7.0%),and Scenic Rim in Brisbane (up 6.5%). Most of the markets with a strong recovery had seen relatively mild downturns to begin with.

A good example of this is Sydney’s Central Coast, where values declined just -0.1% over April. The Central Coast has been a resilient and popular market through much of 2020 due to the relatively affordable and low density stock across the region, as well as the coastal appeal. Since March, dwelling values on the central coast have increased 6.5% through to December.

Of the 10 council regions where values have been most impacted since the onset of the pandemic, eight were located across Melbourne, and two were in Sydney. It is unsurprising to see Melbourne dwelling markets have a long way to go before recovering value. Housing demand in this historically global city has been hampered by extended international border restrictions, as well as domestic social distancing policies through the September quarter.

Highlighting the depth of decline, or value increases, at a LGA level has important implications for real estate, banking and finance. The data shows inner-Melbourne council areas may be at greater risk of negative equity for recently purchased homes. For first home buyers or first time investors, the data also demonstrates where values are relatively discounted due to COVID-19. However, it is worth noting that in 2021, more markets are likely to move into recovery mode. This is expected as long as economic conditions continue to recover, and mortgage rates remain at record lows.

Eliza Owen is CoreLogic's head of research.
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Data from CoreLogic reveals which housing markets have seen the highest value increases relative to their value at March 2020.

Which housing markets are back above pre-COVID values?

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<h2>EXPERT INSIGHT</h2>

The first indicators for 2021 – home prices and manufacturing activity – are exhibiting signs of economic strength, rather than weakness.

Home prices are rising across the country. In fact home prices only fell in two of the 88 regions in the past month. And over the past year all but 12 regions posted gains in home prices. The icing on the cake: data shows that in 39 of the 88 regions, home prices were at record highs at the end of 2020.

The outback regions of South Australia and the Northern Territory as well as the mid to far north coast regions of NSW were amongst those posting the strongest home price gains in December. The Sydney Eastern Suburbs (down 0.1 per cent) and Far West and Orana region of NSW (-0.4 per cent) were the only two regions to record falls in home prices in December.

Regional home prices continue to outpace capital cities and house prices are out-pacing apartment prices. Both reflect Covid-19 effects, especially the new reality that work can be done anywhere and at any time.

The manufacturing sector is expanding solidly. In fact many companies reported that “backlogs of work had risen simply due to a short-term inability to expand production capacity sufficiently to meet the recent surge in demand.” And further, “efforts to boost capacity were reflected in manufacturers taking on extra staff at a rate not seen for just over two years.”   

What do the figures show?  Home prices – December 2020

The CoreLogic Home Value Index of national home prices rose by 1.0 per cent in December to be 3.0 per cent higher over the year. 

In capital cities, prices rose by 0.9 per cent to be up 2.0 per cent over the year. House prices climbed 1.1 per cent, but apartment prices rose by just 0.2 per cent. House prices were up 2.6 per cent on a year ago and prices of apartments increased by 0.2 per cent.

In regional areas, home prices jumped 1.6 per cent with house prices up 1.7 per cent and apartment prices up by 1.1 per cent. Regional home prices were up 6.9 per cent on the year with houses lifting 7.1 per cent and apartments up 5.9 per cent.  

The average Australian capital city house price (median price) in December was $696,413 and the average unit price was $574,388.

Home prices were higher in all eight capital cities in December: Sydney (+0.7 per cent); Melbourne (+1.0 per cent); Brisbane (+1.1 per cent); Adelaide (+1.1 per cent); Perth (+1.1 per cent); Hobart (+0.7 per cent); Darwin (+2.3 per cent); Canberra (+0.6 per cent).

Home prices were higher than a year ago in seven of the eight capital cities in December: Sydney (+2.7 per cent); Melbourne (-1.3 per cent); Brisbane (+3.6 per cent); Adelaide (+5.9 per cent); Perth (+2.0 per cent); Hobart (+7.7 per cent); Darwin (+11.9 per cent); Canberra (+8.5 per cent).

Total returns on national dwellings rose by 6.6 per cent in the year to December with houses up 7.1 per cent and units up by 5.0 per cent on a year earlier. In contrast, the S&amp;P/ASX All Ordinaries Accumulation Index rose by 3.6 per cent over the year to December. 

What are the implications for investors?

Higher home prices boost household wealth and also serve to boost borrowing capacity. As such the lift in home prices is positive for consumer durables including demand for cars.

CoreLogic reports that annual home sales were around 8 per cent higher over 2020. CoreLogic notes: “More home sales implies more work for a range of industries including real estate professionals, removalists, conveyancers, financiers and building inspectors along with more spending on household goods such as home furnishings, white goods and appliances.”

The strength in manufacturing is positive for employment and related sectors such as retailing. The increases in input prices and selling prices need to be watched though.

Risks to the housing market – prices, sales and building – include policy mistakes, the scaledown of JobKeeper and JobSeeker, new waves of virus infection and the length of time that foreign borders stay closed.

CRAIG JAMES is the Chief Economist at CommSec
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Regional home prices continue to outpace capital cities and house prices are out-pacing apartment prices

COVID-19 Recovery

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