Will 2022 be a good year for the Australian property market?

What happened to the Australian property market in 2021?

2021 was a tumultuous year for property, business and health.

As Australia experienced its third and fourth waves of the pandemic, the country also saw its fastest rise in dwelling values over a 12-month period since the 1980’s. An extraordinary 22.1% of growth was observed across the country despite restrictions placed on travel, house inspections and auctions.

Even with skyrocketing property prices, Melbourne’s pandemic-induced lockdowns played a role in slowing the city’s growth compared to other parts of the country.

With international immigration on hold and consumers choosing to move away from high-density inner-suburbs, it’s no surprise that the best performing markets across the country were regional New South Wales and regional Tasmania with 29.8% and 29.5% growth, respectively.

Brisbane and Hobart, who were largely spared from the lengthy lockdown measures, experienced equally staggering numbers as they performed the best of the capital cities.

If nothing else, the last few years have shown us how wild and unpredictable property trends can be.

So as we enter yet another year complicated by Covid and it’s new Omicron variant, it’s important that we try to understand where the property market is heading.

Will house prices fall in 2022?

Whilst we can’t predict the future, there are a few things we can confidently say will not happen.

We know that the Australian property market will not have another year of growth like it did in 2021. This is unsustainable for the market and it is clear that APRA would again intervene to slow growth if it appeared properties prices continued upon last years trajectories.

The insane levels of pent-up demand seen over the last 12 months are beginning to wane, and affordability is increasingly an issue for many buyers with the rise of property values far outpacing wages growth.

CoreLogic’s Research Director Tim Lawless shared similar beliefs in his Jan 13th report; Peak, Peaking, Peaked - How To Read Australia’s Housing Market.

“Although we can’t see any evidence that specific housing markets have peaked, it is clear that most markets have moved through a peak rate of growth,” Mr Lawless said. “What I mean by that is the point at which markets achieved their biggest monthly growth rate. We saw most of the capitals moved through a peak rate of growth around March last year.”

The big four banks have also followed CoreLogic’s sentiment that the growth in house prices will slow down in 2022 and that a small correction is likely in 2023 with a rise in the cash rate from the RBA.

But despite this, there is still plenty of confidence that prices are yet to peak… just don’t expect all property markets to behave the same.

After a year that saw outer-suburban and rural areas perform incredibly strongly, experts have inner and middle-suburban areas poised to outperform the cheaper options on the market.

In Melbourne, dwelling values appreciated by 15.1% last year despite heavy lockdowns and a halt on population growth, indicating good long-term signs for the market. With the world transitioning out of Covid’s grip, Australia’s second biggest city should return to its population trajectory that is expected to overtake Sydney’s in the coming decade.

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Factors to consider in the Australian property market

When trying to predict house prices in 2022, these are the biggest factors that you need to consider:

• Policy related factors from APRA and the RBA
• Consumer confidence emerging from the pandemic
• Covid restrictions and their affect on stock listings
• Wage growth
• Market conditions

All things considered, it is incredibly difficult to crystal ball the Australian property market on a macro or micro level.

If you are currently thinking about purchasing your next home or investment property; our advice stands that the best time to invest is when you can afford it. Those who didn’t purchase in 2021 because they anticipated a crash have missed out on tens of thousands of dollars.

Following our key investment drivers of what makes a property ‘investment grade’ will ensure you will find great investment opportunities that will create amazing results over the long term.