How Real Estate Gets Real. 2022.

By all accounts, Australia’s housing market has a tough act to follow in 2022. Dwelling values soared 22.2 per cent nationally this year – the largest annual increase since 1989, fuelled by ultra-low interest rates, high household savings, government stimulus and relatively low listings. The estimated value of Australia’s residential real estate lifting from $7.2 trillion to a record high of $9.4 trillion in just 12 months.

The big four banks, economists and real estate industry players have forecast the market won’t replicate the same pricing frenzy that it saw in 2021.

The slowdown is soon forecasted to set in, in particular Sydney & Melbourne, which would be triggered by a combination of factors, the main items being poor affordability, a surge in listings and tightening credit policy.

It is presumed, Banks will lift their lending rates and or/assessment rates, which means less people will be able to borrow money to buy property. This is in addition to the RBA lifting or threatening to lift the cash rate in 2022.

For this reason, Prices are expected to flatline by the second half of the year, with larger price falls on the horizon for 2023.

As we see it, affordability is probably going to be the most significant factor and this is going to take some steam out of the housing market quickly. The stimulus changed behaviours and spending during the pandemic which everyone is now realising was not permanent and it has already unwinded even amongst the recent waive in terms of government support.

The impetus of low interest rates allowing borrowers to pay more has worked its way through the system and with property values being 20-30% higher than at the beginning of this cycle at a time when wages growth has been moderate at best and minimal in real terms for most Australians, this means that the average home buyer won’t have more money in their pocket to pay more for their home.

While there are always people wanting to move house and many delayed their plans over the last few years because of Covid, there are only so many buyers and sellers out there and there will be fewer looking to buy in 2022. We felt this hesitancy and demand starting to slow in the very late stages of 2021.

The softer performance also comes as weaker demographic trends as population growth negatively impacted with closed international borders, strong migration to the regional areas and even many leaving Victoria which was associated with Covid outbreaks, lockdowns and opinions on laws. There was also an added attractive advantage with homebuyers having the option to be based anywhere due to flexible working arrangements.

With affordability & demand tightening, increased rental demand is setting in at a time of very low vacancy rates in the suburbs. This will see rentals continue to rise throughout 2022.

The international borders are opening, with overseas migrants and international students to return. This will assist the vacancy rates in inner city.

As we see it, Melbourne, where rental markets are up, down & about to take off.

Call us today for all things selling, buying, leasing, management & renting.

Stay safe out there.