CoreLogic figures released this week showed a 1.0% rise in property values in December and Australia’s housing values ended the calendar year 2021 with a huge 22.1% over the year. So, what does this mean for 2022?
Sydney property market 2022
1. What do the experts predict?
According to CoreLogic’s research director, Tim Lawless, it’s likely that the rate of growth in housing values will continue a softening trend in the monthly growth rate that has been evident since the national index moved through a cyclical high of 2.8% growth in March 2021.
On the other end of the spectrum, momentum has slowed quite sharply in Melbourne and Sydney dwelling markets, with both cities recording the softest monthly reading since October 2020.
“A surge in freshly advertised listings through December has been a key factor in taking some heat out of the Melbourne and Sydney housing markets, along with some demand headwinds caused by significant affordability constraints and negative interstate migration,” Mr Lawless said.
“Combining these factors with the subtle tightening of credit assessments … it’s highly likely the housing market will continue to gradually lose momentum,” he said.
However, Steve Mickenbecker from the Canstar group described the falls as “modest”.
“With lockdowns ending and travel restrictions easing, we can expect further growth in property markets in the coming months,” he said.
In particular, well-located, family-friendly apartments in Sydney’s inner suburbs are likely to perform strongly due to increasing needs from owner-occupiers and investors.
Real estate in Sydney’s regional locations, and in particular in lifestyle locations like the Central Coast, Wollongong & the NSW South Coast should also continue to perform strongly with beachside suburbs likely to outperform the wider overall market.
2. The Rise of the Regions
According to internal migration data released by the Australian Bureau of Statistics (ABS), in the year 2020, there were 233,100 Australians who moved to live in regional areas and 190,200 people that departed for the capitals, and this continues to be among the top trends for 2021.
According to Corelogic, regional markets are regaining momentum in terms of the rate of value growth in the capital city market. Regional dwelling values increased by 6.4% in the three months to December, compared to 5.1% in the previous quarter.
This could be the result of a new wave of demand as buyers exited the extended lockdowns in Sydney and Melbourne. Regional markets, particularly those with a lifestyle appeal, are likely to benefit from increased demand as remote working policies become more common, and demand for vacation homes remains strong despite ongoing international border restrictions.
3. What about the interest rates?
The forecast says that interest rates will remain unchanged until at least the end of 2022, which is in accordance with the recent decision by the Reserve Bank of Australia (RBA) to keep the cash rate at 0.1%. A recent statement that the RBA’s board, “will not increase the cash rate until actual inflation is sustainably within the 2 to 3 percent target range”.
But Mr Louis Christopher, managing director of SQM Research, was quick to point out that any serious rise in inflation next year could result in the RBA lifting interest rates sooner than expected.
“We’re very confident inflation is going to rise next year,” he said. “If the headline inflation rate stays within three to five per cent, perhaps the RBA will try and hold, but if it heads towards six per cent, I think the RBA will be forced to move.
4. Australian prudential regulation authority
The bank suggested that rising house prices will deter some home buyers, while the Australian prudential regulation authority decided to ensure new borrowers can service a mortgage if interest rates jump 3% will put a brake on lending.
Hence, now is an appealing time to get into investment property before the official interest rates rise.
5. Property prices and the economy
As the economy continues to benefit from easing COVID-19 restrictions, the current low-interest rates should continue to support requirements, along with tight advertised supply levels and improving consumer sentiment, according to CoreLogic.
As a result, a pace of capital gain will be more sustainable and there is still plenty of room left in the Sydney property market with values likely to keep increasing throughout 2022 and into 2023.
With the opening of the international borders of Australia, Sydney will quickly become a popular destination for students and highly skilled workers and this will launch the Australian property market to new heights. So, this is the ideal time to get your foot into the housing market before the demand increases!
6. Predictions for Property price growth pattern
Over the last year, Australia’s property values have increased along with property demand at rates not seen in over a decade, and Sydney has led the change.
Increasing at an incredible rate in 2021, Sydney dwelling prices are expected to grow significantly as strong demand from purchasers outpaces the volume of new listings that emerge.
The final word
The property market for next year looks very promising for potential first home buyers and investors. However, in order to reap maximum profits, you should consider buying when the prices haven’t hit the roof also keeping affordability constraints in mind. We understand that buying property can be an overwhelming venture and that is why we are here to guide you!
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