Property predictions for 2022
Jan 2022Karen Millers
Categories
Location ReportsMedia releasesNational market updatesPersonal advisersPIPA AdviserPIPA Annual Investor Sentiment SurveysPIPA Member ProfilesPIPA video updatesPIPA webinarsPodcastsProperty advisersProperty newsLatest Articles
PIPA Member Profile | Teliah Burstow, Khove Holiday Homes
Navigating Claims and Coverage – Insights into professional indemnity insurance
Biggest mistakes first-time property investors make
Planning incentives the ‘golden lever’ to boost housing supply
Expect the house price surge to slow down, investor demand to keep rising and the Brisbane market to keep heating up, industry players have said.
The housing market will slow
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, with prices still expected to increase, but at a slower rate.
Peter Koulizos, chair of industry body Property Investment Professionals of Australia (PIPA) explained there are a number of reasons property prices will decelerate.
“The supply of houses for sale will increase, as lockdowns have been lifted and restrictions on interstate travel have been eased,” Mr Koulizos wrote in the 2022 Bricks & Mortar Media Property Forecast Report.
“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.”
In 2021, property prices hit annual growth of 20.6 per cent for the 12 months to November, based on CoreLogic data. For houses alone, prices were 22.2 per cent higher over the year to November, adding around $126,700 to the median value of an Australian home.
But, a shift in population as migration between capital cities and regional areas continues is expected to keep pushing property prices and rents up. Further, the international borders are set to open, with overseas migrants and international students to return.
“Demand for property will increase significantly, initially putting pressure on rents but this will flow onto property prices,” Mr Koulizos tipped.
However, there has already been a softening in price movements, with November seeing a 1.3 per cent rise in house price values – the smallest incline recorded by CoreLogic since January.
The big four banks have projected that there will be a rapid slowdown in 2022, before an eventual correction in 2023.
ANZ has tipped there will be a national price fall of 4 per cent in 2023, to follow a 6 per cent rise in 2022.
CBA modelling has pointed to a 10 per cent fall in 2023, to coincide with a cash rate rise to 1.25 per cent – after a 7 per cent rise in 2022.
NAB expects dwelling prices will have a more subdued 5 per cent increase in 2022.
Meanwhile, Westpac released a forecast tipping price growth will moderate to 8 per cent in 2022, before a 5 per cent correction in 2023.
If APRA takes further actions to tighten lending following its raised serviceability interest rate buffer, some observers, such as Adviseable buyer’s agent Kate Hill, believe the housing market could cop further impacts.
“Next year, APRA could also play a role for property buyers, but the financial regulator does seem to be all bark and no bite this time around,” Ms Hill stated in the 2022 Bricks & Mortar Media Property Forecast Report.
“If they intervene more strongly, then that will have an impact on market conditions.”
SQM Research has forecast no further action from APRA would result in a stronger property price rise – projecting a 3 to 8 per cent uptick in 2022, instead of a maximum increase of 5 per cent.
If the regulator did take action, the property research firm has projected that the resulting price falls would be led by Sydney and Melbourne, after their markets were the most affected by APRA intervention in 2017.
Return of the investor
The reopening of international borders and the return of international students and international skilled labour to cities are expected to drive a stronger demand for apartments.
Buyer’s Domain principal Nick Viner commented investors will be looking towards vacant apartments that have not been used during the pandemic, particularly in university areas.
“Investors will be returning to the market to take advantage of these new trends,” Mr Viner said.
He was echoed by Grant Foley, buyer’s agent from Grant Foley Property, who wrote: “If international borders open as planned, vacancy rates will fall and rents will rise, making the Sydney unit market even more attractive to investors, with many high-income Sydney professionals and top tier corporates traditionally preferring to invest in their own ‘backyard.’”
New housing loans for investors reached $9.7 billion in October, the highest level since April 2015, when the segment reached a $10 billion peak.
But Ben Kingsley, chair of Property Investors Council of Australia (PICA) has warned APRA’s next steps could affect investors, particularly after its serviceability buffer rate rise was expected to hit the segment harder than owner-occupiers.
“It’s clear APRA’s agenda on the risk in the investor lending space has a flow on impact to banks and ultimately the consumer in higher interest rates for investor loans,” Mr Kingley stated in the Bricks and Mortar report.
“This could have some lasting effects on property investor demand levels or at least keep them in check.”
Working from home to stay
Some have predicted the pandemic-forced trend of working remotely to be a permanent shift.
Mr Koulizos from PIPA and Mr Foley from Grant Foley Property have anticipated the COVID-induced change will see migration out of capital cities continue, as employees gain flexibility in their working arrangements.
“I don’t believe we’ve reached peak relocation at this stage, so expect aspirational regional and lifestyle markets will continue to outperform for some time yet,” Mr Foley wrote in the report.
However, others such as Marcus Roberts, founder of Brighter Finance, expect the COVID-induced sea and tree changes to slow down.
He believes people will move into suburbs close to the city, as they start moving back to working from the office.
“When it comes to investment properties though, the trend we’re expecting to see is more investors purchasing properties outside of Syndey, in Western Sydney, regional areas and also Queensland,” Mr Roberts said.
Brisbane, Qld market to keep firing ahead
A few inside the property industry have tipped that Brisbane and its surrounding regions in South-East Queensland will continue on their uptick in price growth.
Streamline Property Buyers managing director Melinda Jennison believes that after the state border reopened in mid-December, more interstate migrants will add to the already heightened demand in the Sunshine State’s capital.
The reopening of international borders is also expected to add further pressure.
“Brisbane property growth is leading the nation and we expect this may continue in the months ahead,” she wrote in the Bricks and Mortar report.
Mr Foley, buyer’s agent from Grant Foley Property has suggested prices in Brisbane will rise by a further 10 to 15 per cent in 2022, fuelled by interstate migration and investor activity – in contrast to his moderate prediction for Sydney of 5 to 10 per cent.
The Brisbane market could slow at some stage next year, if prices stretched to a level where affordability became a concern and if there were further constrictions on lending or rises in fixed interest rates – but Ms Jennison has said there is still no sign yet of those limits.
“We expect [regulatory changes or a rate rise] to have less of an impact on the Brisbane market due to it being more affordable relative to the larger cities of Sydney and Melbourne,” Ms Jennison asserted.
A further dampening force could be a rise in listings.
“With listings currently 33.9 per cent lower across Brisbane in the four week period to 28 November compared to the five year average there is clearly a shortage of properties for the heightened demand we have been experiencing throughout the city,” Ms Jennison stated.
“At this stage we [are] seeing no signs of this [a substantial rise in listing volumes], but it is an indicator to keep an eye on in the early months of 2022.”
Originally Published: Sarah Simpkins | Mortgage Business | 4 January 2022
https://www.mortgagebusiness.com.au/breaking-news/16346-property-predictions-for-2022