The COVID-19 pandemic has had drastic impacts on many aspects of our lives, ranging from the global economy to each individual person. Lockdowns, restrictions and closed borders have caused some of the biggest short-term contractions in global economic activity ever recorded.
When it comes to the housing market and financial industry in Australia specifically, it was an interesting time – and that’s putting it mildly. As COVID-19 cases began to increase, there was speculation the value of some homes could decrease by as much as 30% – 40%.
With the outlook for our economy looking quite grim, the Reserve Bank of Australia cut the cash rate to an all-time low, and the lenders all followed suit and reduced their variable rate offerings as the cost of borrowing greatly reduced. Banks/Lenders introduced new payment pause options for home loans which gave the option to customers to place their repayments on hold for several months, although Interest was still being charged which proved a nasty surprise for some borrowers.
The Government also brought in a “HomeBuilder” grant, which provided a $15k payment boost to any customers who were constructing a new home or completing extensive renovations, in a bid to keep the construction industry afloat.
As many Australians continued to work from home, they were able to build up considerable savings by not spending so much disposable income due to lockdowns and travel restrictions, which enabled many to afford a sufficient deposit for a home loan. What made the option even more appealing was the super low interest rates, with some interest rates being as low as 1.74% for 4 years Fixed. The Reserve Bank indicated they did not anticipate a need to raise the cash rate till at least 2024.
During this time, a lot of people were hesitant to sell their home, so the number of new listings available greatly reduced. In short, the perfect storm occurred, and Australia was in a home buying frenzy. House prices skyrocketed around Australia, and not just in major metropolitan areas, but also in regional areas where people now had the previously unavailable option to work from home.
But how did that look in the earlier days of the pandemic, and how did other countries perform?
To find out, the home loan experts at Compare the Market have explored which OECD countries (Organisation for Economic Co-operation and Development) saw the biggest changes to their GDP in 2020.