The pandemic panic and our property markets

by John Lindeman

The coronavirus outbreak is creating questions, fear and even panic as it spreads and has the potential to affect many of us personally. How will it impact our property markets?

The effects of the coronavirus crisis are proving to be very similar to what took place during the biggest viral outbreak Australia has ever had, the Spanish flu pandemic of 1919.

The similarities are so striking that the outcomes for our property markets are also likely to be the same.


Unlike shares, which react quickly and violently to such scares, the property market is far less volatile – it takes months before sale prices move in response to changes in demand. We are already seeing a decline in new coronavirus cases reported in China, and by the time any local property market shift is apparent, the worst of the outbreak will probably be behind us. 

The demand for housing will continue to outstrip supply

Housing investors have nothing to fear for one simple reason – housing demand is closely linked to population growth and in that regard, we have one of the fastest growing population rates in the western world. This leaves our largest capital cities in a more or less permanent state of housing undersupply, so that if fewer people can afford to buy, more have to rent.

To find out what the coronavirus outbreak is likely to cause locally we need only look at what took place during the worst pandemic ever to strike our shores.

This was the Spanish flu of 1919, which was brought here by soldiers returning from the First World War and then quickly spread through our major cities.

The current outbreak compared to the Spanish Flu Pandemic

The events which unfolded in response to the Spanish flu are strikingly similar to what is occurring right now. As the media whipped up fear and hysteria with alarmist headlines, people grabbed anything that they thought might protect them.

Overseas arrivals were quarantined, public events were cancelled, people wore facemasks and those infected were isolated and the worst cases hospitalised. By the end of 1919 forty per cent of the population had caught the Spanish flu but only 15,000 people had died.

Housing demand totally overwhelmed the effects of the flu

Despite expectations, capital city housing prices didn’t fall at all, as the graph shows. They actually boomed in 1919 and then continued to rise by more than ten per cent each year until 1921.

Clearly, buyer demand was rising to such an extent that it completely overshadowed the effects of the Spanish flu.  

The reason for this growth in housing demand was a huge rise in our population, as the green line in the graph shows. During 1919 our population grew by over 100,000 people, despite the fact that the Spanish flu had taken 15,000. The increase was caused by soldiers returning home after years away during the war who were joined by thousands of refugees and immigrants fleeing a war-ravaged Europe to start new lives in Australia.

Housing demand is always closely linked to population growth

Our population grew by more than 100,000 each year during the first post war decade and resulted in severe housing shortages in our biggest cities. Housing prices rose for several years and this was followed by rent increases as housing demand grew from those who couldn’t afford to buy.

The similarities to the present are obvious – we have one of the highest population growth rates in the western world as the graph shows.

Our current growth rate is similar to the post First World War period and it is driven largely by permanent overseas arrivals who need immediate housing.


Australia is once again set to become the lucky country

As a result of its location, abundant natural resources, vibrant culture and positive outlook, Australia became known as the lucky country. We continue to be seen as a safe haven during times of international strife or recession and the Spanish flu experience shows us that our population growth rates are likely to rise rather than fall once the panic is over and borders are opened again.

There are other significant similarities to the Spanish flu outbreak and the current pandemic as well, such as falling interest rates and plunging share prices. In 1919 Investors abandoned savings and shares and flocked to the safe haven of property. There is every indication that they will do the same again.

Taken together, all these indicators suggest that property prices will continue to rise in our major capital cities despite the pandemic, and that they could rise strongly once coronavirus has become old news.