The first confirmed case of COVID-19 in Australia was announced on January 25, 2020, with the World Health Organisation (WHO) declaring the virus a worldwide pandemic on March 11, 2020.

Four years on and while toilet paper is back on supermarket shelves in force and we're allowed out of our homes, plenty of points in our everyday life have changed.

Not the least of these changes are those still impacting the real estate market.

Cash rate changes and inflation are no longer barely understood issues but a favourite subjects at the dinner table.

Real estate talk also centres around issues such as the mortgage cliff, refinancing and the rental market "crisis". 

(And don't even get us started on the chronically overused "unprecedented" description utilised for anything pertaining to COVID).

Here are the top ways COVID has changed the real estate market.

1. Cash rates

Aussies experienced 13 cash rate increases between May 2022 and November 2023.

Yet while a 16-month 0.1% cash rate between November 2020 and May 2022 - the lowest figure we've ever experienced - was great for home buyers in the short term, it was always going to be grim news in the long term.

Hence, the "mortgage cliff" situation many Aussies have already experienced (or are about to), even though the current cash rate has remained steady at 4.35% since November 2023.

2. Inflation 

There is good reason why Aussies now find inflation highly important and absorbing with COVID still impacting this figure.

Inflation is otherwise known as the price of general goods and services that the average household will regularly purchase ie groceries.

And, similarly to the cash rate, a high inflation figure doesn't necessarily bode well for a nation's economy and thus, an inflation peak of 7.8% in December 2022, was not a good sign.

The monthly CPI indicator - a strong measure of inflation - dropped back to a much better figure of 3.4% in the 12 months to February, according to the Australian Bureau of Statistics (ABS).

However, this is still not low enough to please the Reserve Bank of Australia (RBA), hence its too oft-repeated phrase that "The Board expects that it will be some time yet before inflation is sustainably in the target range".

NB: the Russian invasion of Ukraine in February 2022 didn't help the inflation situation either, particularly regarding imports and exports in the European Union, and in turn, Australia.

"The Russian-Ukraine war triggered a massive shock to the global economy, especially to energy and food markets, squeezing supply and pushing up prices to unprecedented levels," the European Central Bank (ECB) stated in February 2023.

"Russia was a key energy supplier to the euro area before the war (and) Russia and Ukraine also played a large role in euro area imports of food and fertilisers before the start of Russia’s invasion."

3. Property values

House prices in most capital cities were expected to enter a cyclical upswing at the start of 2020; however, the onset of COVID disrupted this forecast, according to a KPMG Economics report in July 2021.

The high property increase in Australia's already expensive property market since early 2020 has made life worse for home buyers.

The rush to the regions' and smaller capital cities trend - which enabled buyers to escape locked-down and already expensive major cities - was a key factor in these price hikes.

The CoreLogic's report, Seven ways COVID changed housing trends, released in March 2024, highlighted the capital cities' and regions' value changes between the onset of COVID and February 2024.

NB: Melbourne recorded the least-dramatic change of any capital city, due largely to experiencing the longest pandemic lockdowns in the world.

• Sydney: 24.8% to $1,128,155
  
• Melbourne: 11% to $778,941
• Brisbane: 53.5% to $805,593
• Adelaide: 55.3% to $727,142
• Perth: 52.9% to $687,004

4. Rental market

The current rental market situation can also be blamed on COVID.

Vacancy rates have dropped to around 1% or lower in capital cities and regions nationwide.

CoreLogic's April 2024 HVI report showed the major capital cities recorded annual rental increases for houses between 7.6% (Brisbane) and 13.7% (Perth).

Rental increases for units were even higher - between 9.4% in Melbourne and Sydney and 15.9% in Perth.

Then there's the continual "imbalance" between housing supply and demand, further exacerbated by lingering construction supply inadequacies which continue to linger well after the pandemic.

Population growth is up, as are post-pandemic immigration numbers and perhaps most significantly of all, household numbers and preferences also changed during COVID.

An RBA report released in March 2023 noted that pandemic lockdowns and health concerns resulted in people desiring more space in their homes and wanting to live with fewer people.

"This shift in living preferences contributed to average household size declining to its lowest level in at least a quarter of a century," the report stated.

"The decline in average household size since the start of 2020 – around 1% - is estimated to have contributed to around 120,000 additional households being formed and, as a result, additional demand in the rental market."

Not helping tenants are new government rules and regulations, which while giving preference to tenants over landlords, have resulted in property investors leaving the market.