Who Really Benefited from the Pandemic Housing Boom?

The housing debate often frames investors as the villains of Australia’s affordability crisis. It is easy to point to negative gearing, cheap credit and capital gains concessions and conclude that speculators drove the pandemic bubble and pocketed the windfall. But this misses the real transfer of wealth that occurred during the COVID years.

During the pandemic, investors accounted for roughly 30 per cent of housing purchases. Some did well, particularly those who bought established homes in markets that surged. But many others were caught out, not only by labour shortages, soaring material costs and stalled projects, but also by the rapid rise in interest rates that followed. As a class, investors did not profit nearly as much as is often assumed.

What really drove prices higher was a collision of extraordinary demand with constrained supply. Ultra-low interest rates, mortgage deferrals and direct stimulus programs such as JobKeeper and HomeBuilder supported household incomes and encouraged housing activity. These policies were necessary to keep the economy from collapsing during lockdowns, but we did not walk into them fully aware of the long-term consequences. Not only did they fuel demand, they also channelled activity into supply-constrained sectors like construction, where builders already faced material shortages and labour bottlenecks. Many firms simply could not deliver what was promised and went bankrupt under the strain, leaving buyers stranded.

With more buyers chasing fewer homes, and a building industry unable to expand supply, prices were pushed sharply higher.

So if both new investors chasing yield and first-home buyers entering at peak prices often ended up worse off, who actually gained? The biggest winners were long-term owner occupiers. Households that had purchased decades earlier, whether down-sizers cashing out or families simply holding, captured the largest windfall from the surge. In effect, they became accidental investors. In fact, anyone who has ever bought a home is, technically, an investor because they have put capital into an asset regardless of if they were expecting it to hold or increase in value. The fact that so many owner occupiers closely follow the value of their property shows a level of awareness that they are investors, whether they choose that label or not.

The real wealth transfer was not to the people most often blamed. It was to those who already owned, and who were best placed to benefit from extraordinary policy support and tight supply. Unless we recognise this, we will keep misdiagnosing the roots of today’s crisis and blaming the wrong people for it.