Around the world, including Australia, house prices have risen this year, despite the fact that the world’s economies are facing a COVID-induced recession. Across the ‘rich world’ dwelling prices have risen an average of 5% in the last twelve months.

During the GFC, house prices were obliterated—so what’s different this time?

The Economist believes there are three factors at play here: monetary policy, fiscal policy, and changing preferences in buyers.

Central bankers around the world have cut policy rates by an average of two percentage points. In Australia, you can get a one-year fixed rate mortgage with an annual interest rate as low as 1.99%. And in the US, you can get a thirty year fixed rate mortgage at just 2.9% per annum. And multiple studies have shown a correlation between low interest rates and higher house prices.

Fiscal policy incentives, such as wage handouts and welfare benefits, amount to an average of 5% of GDP. In a normal recession, people becoming unemployed and losing their incomes would result in foreclosures, which would drag real estate values down. But these stimulus packages have kept incomes up, and the level of distressed sales remains low. In fact, disposable income in the G7 economies was up by $100 billion in the second quarter of this year.

And the last factor at play is buyer preferences. Amongst the OECD, which has 37 member nations, the median amount spent on housing is 19% of annual income. As much of the workforce has shifted to remote work—one fifth of office workers are still working from home—many buyers are willing to spend more on a nicer place to live. After all, should lockdowns resume, they’re going to be spending more time at home in future.