Alan Kohler: Long Covid’s devastating and glorious effect on the cost of housing

The total value of all Australian dwellings has increased by $3 trillion since March 2020.

The total value of all Australian dwellings has increased by $3 trillion since March 2020. Photo: TND/Getty

This week is the fourth anniversary of the World Health Organisation declaring Covid-19 a global pandemic. 

It’s also exactly four years since the Australian government’s first emergency stimulus package, including $750 cash to anyone on government benefits, the cancellation of Formula 1 Grand Prix in Melbourne as fans were queueing at the gate and supermarkets running out of toilet paper, giving anthropologists a new insight into humanity’s true priorities.

The sharemarket was three weeks into a stomach-in-the-mouth crash and one week away from bottoming. Anyone brave enough to have bought on the Australian market this week in 2020 has made a 100 per cent return in four years. 

And now here we are in March 2024, contending with long Covid, both economic and medical.

The medical kind can be devastating and incurable and is getting far too little attention. 

The main symptom is “brain fog”, described as mental sluggishness or lack of clarity and haziness that makes it difficult to concentrate, remember things and think clearly.

In addition, there are headaches, seizure disorders, strokes, sleep problems, and tingling and paralysis of the nerves, as well as several mental health disorders. 

According to an epidemiologist who is studying long Covid, writing in The Conversation last month, there is a large body of evidence that Covid-19 leaves an indelible mark on the brain, but does it in ways that “are still being elucidated, and curative treatments are non-existent”.

Economic long Covid

Economic long Covid comes in two main forms, each of them two-sided, good and bad. First, governments everywhere are up to their nostrils in pandemic debt but the stimulus for which they borrowed still stimulates, keeping unemployment below 4 per cent while interest rates were hiked 13 times, and second, Australian house prices have increased 38 per cent thanks to two years of mortgage interest rates below 3 per cent.

The total value of all Australian dwellings has increased by $3 trillion since March 2020. That has resulted in an increase in total household debt from about $2 trillion to close to $3 trillion, and a lift in total repayments from $9 billion per month to $21 billion or $144 billion extra per year (because mortgage rates have also gone from 2.5 per cent to 6.8 per cent).

That value lift represents roughly $270,000 for each property. But because a third of the 10 million places are rented, the increase in value has entirely accrued to the 6.6 million property owners. That’s an increase in wealth of $450,000 each, on average.

In some places the lottery win has been even greater, specifically anywhere in Western Australia, South Australia and Queensland – capital city or the bush – where housing values rose by more than 50 per cent.

Housing winners and losers

It is both fabulous and terrible.

Those who already owned a house have, to quote Paul Keating, been hit on the arse by a rainbow, especially if they had no debt and were unaffected by the 13 rate hikes. But those with debt, which is most of us, have become asset richer and cash poorer.

Those who don’t own a house are even more locked out than they were before, especially out of capital cities.

Someone on average earnings of around $100,000 a year, paying 30 per cent of take-home pay to service the mortgage, and with a deposit of 20 per cent, can now afford to buy a place for $375,000. 

According to yesterday’s REA listings, that would buy this two-bedroom brick cottage in Horsham, Victoria, over the road from the racecourse and a short stroll from the Horsham CBD. 

Someone on the average wage would qualify for only 20 per cent of the 193,671 homes for sale currently listed on the REA website. 

To buy a median-priced home in Sydney with a 20 per cent deposit, assuming you can inveigle $200,000 cash off your mum and dad, you would need to be making four times the average wage, or about $400,000.

It should be half, and before the pandemic, when housing prices were nearly 40 per cent lower and mortgage interest rates were a third of what they are now, it probably was.

The double problem for renters is not simply that they are locked out of home ownership unless they have wealthy parents, but that average rents have climbed 32.4 per cent since the pandemic began as well. In Perth rents are up by an average of 53.8 per cent according to Corelogic.

The national median rent is up $150 a week, and in Perth by $226 a week.

Back to the first type of economic long Covid: Governments can’t go broke. Those, like Victoria, that have been left with far too much Covid debt, have to raise taxes and cut spending, but the government goes on. 

The federal government has got itself back to surplus through bracket creep, but the debt of $920 billion will be there for a long time.

But families can go broke, and become homeless, and we have the cruelly perverse situation in this country where an electricity or water supplier finds it almost impossible to cut someone off, and must nurse them through an endless hardship process, but landlords can kick out tenants as soon as they miss the rent. 

Electricity and water are essential; a place in which to boil the kettle is not.

So apart from the mysterious, horrible medical symptoms, the main form of long Covid is the huge, permanent lift in the cost of housing.

The long relentless deterioration of housing affordability since 2000 has suddenly gone to a whole new level of heartbreak – for those who don’t own their house, that is.

For those who do, it’s been glorious.

Alan Kohler writes twice a week for The New Daily. He is finance presenter on the ABC News and also writes for Intelligent Investor.

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