At the end of March 2021, the provisional supplement to JobSeeker payments in Australia will end. The JobSeeker “coronavirus supplement” was designed to temporarily provide support for new and current beneficiaries of welfare programs in response to COVID-19 including JobSeeker, Youth Allowance, Austudy and the Parenting Payment.
The supplement was increased by $275 per week, practically increasing by 100% the payments for some recipients. It was recently announced that when the coronavirus supplement ends in March, a further $25 will be added permanently to payments. A permanent increase will benefit some, but welfare recipients will lose $250 per week as compared with the start of the pandemic.
But will the end of the JobSeeker supplement affect the housing market?
First, it must be said that the JobSeeker supplement has already been cut significantly in the past months, with no obvious negative impact to the housing market in general.
In late March 2020, the earliest JobSeeker supplement was established at a further $275 weekly. In late September, the supplement was cut by $125 weekly, and further cut to $75 weekly through the first quarter of 2021.
However, during the period when the supplement was reduced, the housing market momentum increased from September to January. The CoreLogic national home value index grew 3.2% and rental value rose 2.5% from the end of September to January.
Additionally, even as the JobSeeker supplement was being reduced, fewer Australians have been depending on welfare, thanks to a solid turnaround in the labour market.
According to the Australian Government Department of Social Services (DSS), the number of JobSeeker recipients were 11.7% lower towards the end of January 2020, versus the end of September. However, the risk to wider-spread housing spread remained elevated, because the number of JobSeeker recipients by January was still up 55.9% than at the start of the pandemic in March 2020.
The impact of the changes to JobSeeker on housing market values would likely be minor. As lower income households mostly have lower rates of home ownership, it is more likely that households benefiting from JobSeeker are tenants. This would suggest an indirect effect on housing values, where lower rental returns could affect an investor’s inclination to pay for a house.
However, upon checking on areas with the highest proportion of JobSeeker beneficiaries in Australia compared with the local population, rental returns have been varied since the huge cuts in the JobSeeker supplement in September.
The table below, which tracks changes in rent from September 2020 to January 2021, shows this trend in the markets with the greatest proportion of JobSeeker beneficiaries.
Only one region, Queensland – Outback – saw a reduction in rental values, while the rest of the SA2 markets saw an average growth in market rents of 4.2%, which is actually higher than the 2.5% growth in rent values across Australia over the same period.
One significant information to take note of is the absence of data for rental performance in the markets where the coronavirus supplement remained the same. In these situations, rents may have risen even more.
However, what the data underscores is that the looming changes to JobSeeker could cause more discrepancy between incomes and housing costs for some of most vulnerable households in the country. These rental markets may be improving collectively, but housing problems and even homelessness, may be experienced by people whose source of income have been affected by COVID-19. Changes to JobSeeker may not likely to affect the housing market, but reduced welfare could significantly impact housing situations for plenty of people.