Australian property market outlook 2021 - 2022

In the Australian property market, and generally, we are certainly living through unusual times, navigating lockdowns, business closures, and more than a little uncertainty regarding the economy.

With this in mind, it’s no surprise that the one of the main concerns is how this is all going to impact the property market for the rest of 2021, and into 2022.

Anyone who has bought or sold a property recently will tell you that despite the challenges described above the Australian property market appears to have been largely unaffected, with property values rising in almost every market around the country.

Cities in particular have experienced exceptional growth. To date, Sydney house prices have risen over 24%, Melbourne 15% and Brisbane 20% in the last year and are predicted to maintain this double digit growth to the year end. In fact, the CoreLogic National Home Value Index reported that the annual property price growth is at its highest in 30 years.

Australia’s major banks confirm this prediction of continued, if unexpected, growth, believing they are in part reflective of buyers becoming more familiar with remote viewings, and remote auctions. However, the banks are projecting a more modest rate of growth in 2022, anticipating it to settle at around 7%.

Covid has additionally impacted the market in a number of new ways:

• Unusually, regional values across NSW, Victoria, Queensland, and Tasmania have also lifted significantly, possibly fuelled by the ability for people to work from home and opting to move out of cities.
• And due to the recent limits of movement, people are paying more attention to what’s on offer close to home. Suburbs choice is becoming more important to people, who are prepared to pay a premium for those with good community and recreational facilities. Good grocery stores and cafes they can access easily, and proximity to local walks and green space, and being close to friends and family are driving decision-making.
• Being in lockdown for extended periods, really makes people re-assess their home and lifestyle. When you spend most of your life inside your home, you tend to focus on what might be lacking, such as a garden, a balcony, enough rooms for people to work and homeschool, a bigger kitchen, for example. With uncertainty of our continued situation, many people are looking to upgrade their accommodation and find a property that better meets their new needs.

A more sobering perspective for the Australian property market comes from Australia’s banking watchdog, APRA, whose concerns of buyers becoming unable to service their loans in the event of rising interest rates, has tightened the rules on mortgage lending. New rules affect the serviceability assessments of the lenders to ensure buyers will be able to afford repayments at a rate 3% higher than the offered rate. Additionally, the treasury is also tightening debt to income ratios.

While this is a positive move in preventing buyers from taking on too much debt beyond what they can comfortably afford, APRA advises that the move is not intended to curb price growth. Only time will tell whether what the impact of this will be in reality.

What is clear, is that many home owners may be vulnerable do to a combination of over-exposure of debt and a diminishing financial buffer caused by lockdowns, layoffs, reduced hours, and furlough. Adding an increase in interest rates may be the final action that drives many into financial hardship.

It’s possible that the compound effect of these events will result in more properties coming to market, that will slow growth, as depleted stock levels through the year, have been noted as a factor in driving price growth.

Furthermore, the rising prices of 2021 have excluded many potential first time buyers from the market, as well as those looking to upsize, and new restrictions on lending is likely to further exacerbate the impact upon these groups.

Another consideration that may well affect the Australian property market is the current construction boom. Applications for the government’s Home Builder scheme was over-subscribed by a factor of 4, with 99,000 new home applications and a further 22,000 renovation applications received. This has caused an extremely high demand for trades in the industry, in turn, driving rising prices in labour. Add to this the rapid increase in the price of construction materials, delays in overseas shipments, and a shortage of materials such as timber, renovators face a minimum 15% increase in build costs compared to last year.

How many of these projects will make it through to completion and how many will need to be sold remains to be seen.

One thing is evident – that property value growth is rapidly out-pacing salary growth, and something has to give. A calming of property price growth in 2022 may be a very welcome eventuality.

Despite ongoing attempts to forecast the peaks and troughs of the property market from a host of real estate agents, finance experts, investors, and many others, predicting the property market has always been a somewhat elusive pursuit. If we’ve learned anything this last year, it’s this –  that despite taking every potential influence into account (and we surely must all agree that the last couple of years has brought many), sometimes, you just simply cannot call it. Unexpected and unpredictable appear to be the most common words to describe the phenomenon that has been the boom on 2021.

Our advice, is always that irrespective of market buoyancy, location will drive property pricing when it comes down to individual sales. The criteria of what constitutes a perceived ‘good location’ may change, but the concept remains solid.

Secondly, we believe it’s always a good time to buy property if you are investing for the long term. Any perceived overpayment due to a fleeting rise in values will dissolve over time, in the scheme of your investment. Those who decide to wait for the market to fall and invariably disappointed and often find themselves priced out of the market and wishing they had bought while they still could.

If you are considering a move, but are unsure when the best time might be for you and your property, we are always on hand to offer our advice, with no obligation.

Ask about our LIST NOW, LAUNCH LATER initiative, which will have you ready to sell at the push of a button, whenever you feel ready.