Well, here we are again.  Despite having a lot more information about the virus than last time, plus a number vaccine options, strangely we find ourselves in another lockdown.


On 1st April last year, via a webinar (now on Youtube), I stated quite clearly that I thought the response to the lockdown would lead to “explosive growth” in Sydney real estate prices.

I explained why stock market crashes have historically been favourable for real estate prices, and why this would be the mother-of-all booms.

It was a minority view, but it was correct.

So, here is my take on lockdown 2.0.

Impact on the economy overall

Make no mistakes about it: lockdowns are bad for the economy and for our standard of living.

Any economy is only as healthy as we are productive.  If for any reason, a society stops producing goods and services, that society inevitably becomes poorer.

It gets worse: if that society replaces actual production, with money printing, that society becomes both poorer and more unequal.  Money printing can briefly mask the problem, but it ultimately exacerbates it.

What we have now is inflation masquerading as economic growth, and it’s a huge mistake that will playout over a number of years.

So, even though I am a bull on the property markets, I am a bear on the economy overall.

Impact on Property Markets

Overall, Lockdown 2.0 will prolong the property boom, though it will temporarily take out some steam in the short term.

  • “The Great Cessation”: in the short-term, clearance rates will drop as properties are withdrawn from the market. But don’t be fooled – this isn’t the market falling, it is the market on pause.  It is not a bad market; it is a non-market.  Properties that are withdrawn will appear as “passed in”.  Clearance rates won’t mean anything during lockdown.


  • Interest rates, lower for longer: the main impact of lockdown 2.0, is that it will give permission for central banks to keep interest rates lower for longer. Artificially low interest rates are the main fuel under the fire of higher house prices, and lockdown locks in this policy framework for even longer.


  • Less anxiety this time: as always, greed and fear are in a constant tug of war. I remember the first lockdown, when the sense of uncertainty was very strong.  Fear briefly won that tug of war.  There will not be the that overwhelming sense of fear this time around, and buyers and sellers will be more likely to briefly pause their campaign and then resume more quickly.


  • Lockdown will exacerbate the demand/supply imbalance: lockdown will worsen the supply/demand dynamic. On the buyer side it will keep rates lower for longer, and it will also create urgency for buyers to make their purchase before their finance expires.  Simultaneously, sellers are going to hold back until things “normalize”, whatever that means.



Overall, with the combination of money printing, debt acquisition and lock downs, we are in an inflationary “melt up”.

While this is a destructive overall macro policy mix, it is good for property investors. 

Real estate has its risks and it’s not for everyone, but historically real estate is a lifeboat in inflationary times.

Lockdown 2.0 only serves to pour fuel on current imbalances: it will give the RBA an excuse to keep interest rates lower for longer, and this will keep alive a property bull market that may have ended next year, but will now probably run to mid-decade.

Lockdown will also deter the new supply of homes that would otherwise have come on to the market.  Less supply means higher prices.

So don’t be trapped in a permanent “present tense”.  In the very short term, campaigns will be paused, priorities will change and yes, some steam will come out of the market.

However,, while lock-down will eventually end, Lockdown 2.0 will ultimately serve to prolong the stimulus. And while nothing lasts forever, my guess is that Lockdown 2.0 will actually prolong the current bull market.


John Comino