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29 Nov 2023
Australian property market predictions: what to expect in 2022
After the whirlwind that was the past two years for the Australian property market, you may be wondering what’s in store for 2022. Will we see another year like 2021 where housing values rise by 22.1%, or will the housing market finally cool after two hot years in the spotlight?
Many trends emerged throughout the pandemic, such as a spike in regional relocations and a high demand for detached housing. First home buyer activity surged and new building approvals skyrocketed, prompted by government incentives. Building shortages are paramount, new buyer activity is falling, and diversified market conditions emerged in the second half of 2021.
Let’s get into some knowledgeable property experts' market predictions for 2022.
Many experts have given their housing market predictions for 2022, and many predictions overlap with each other. Let’s discuss a few of the general market predictions, from property price predictions to investor activity.
Many experts have suggested that the property market will shift from ‘demand lead’ to a ‘supply driven’ growth cycle.
Firstly, Arjun Paliwal, founder and Head of Research at Investorkit, said that a lot of the price growth in 2021 was due to supply shortages across all markets. However, he said that 2022 will be a different story, with more stock available to choose from and the subsequent emergence of ‘micro markets’.
“Many areas carry a multitude of reasons for their respective cycles to continue: localised strength in their economies, the continuation of the exodus, affordability, weaker last 10-year rates of growth paving way for a greater cycle length and high current market pressure," Mr Paliwal said.
"These areas are expected to be the majority when counting the total number of cities in Australia seeing high demand."
Simon Pressley, Head of Research at Propertyology, also suggested a two-tiered market: regional property versus capital city property. We will discuss each of these markets later on.
"The combined sum of the many factors that influence property prices points towards a continuation of very strong growth in asset values for quite some time yet," Mr Pressley said.
Michael Yardney, CEO of Property Update, also suggested not all locations will grow at the same rate.
“I can see properties located in the inner and middle-ring suburbs, particularly in gentrifying locations, significantly outperforming cheaper properties in the outer suburbs,” Mr Yardney said.
“While the outer suburban and more affordable end of the markets have performed strongly so far, affordability is now becoming an issue as the locals have had little wage growth of the time when property prices have boomed.”
Mr Yardney also suggested as we emerge from lockdowns and restrictions, there will be a flight to quality property and and emphasis on livability.
“As their priorities change, some buyers will be willing to pay a little more for properties with 'pandemic appeal' and a little more space and security, but it won’t be just the property itself that will need to meet these newly evolved needs – a livable location will play a big part too,” he said.
Mr Pressley and Mr Yardney both agree that property prices will continue to shoot upwards in 2022, though as mentioned, not at the same rate in certain areas.
“We’re heading into a period of strong economic growth, jobs are being created and business and consumer confidence is high,” Mr Yardney said.
“The risks to further price growth include unforeseen consequences from Coronavirus, rising interest rates (unlikely for another year or two) or tightening of lending by APRA.”
CoreLogic also predicted that housing values would continue to rise in the short term, but called COVID the ‘biggest wildcard’. However, CoreLogic brings up the ‘bigger barriers to entry’ into the property market as higher property prices makes it harder to save up for a deposit.
This is backed by Arjun Paliwal, who predicted less first home buyer activity in 2022.
"The biggest challenge for those looking to buy in 2022 and beyond will be their home deposit," Mr Paliwal said.
"While money remains cheap, benefits on offer with price caps attached aren’t very possible to stay under due to price growth."
Mr Yardney also agreed that there will be less first home buyers in 2022, and that instead investor activity will take over.
“While there were many first-time buyers (FHB’s) in the market in the first half of 2021, buoyed by the many incentives being offered to them, now demand from FHB’s is fading as property investors re-enter the market and property values rise,” Mr Yardney said.
Many property experts have chimed in on rental affordability, as rent price increases have risen at the fastest annual pace since 2008 and vacancy rates are at all time lows. Unfortunately for renters, the experts we’ve quoted are saying that rent prices will continue to rise in 2022.
“Increased rental demand at a time of very low vacancy rates will see rentals continue to rise throughout 2022,” Mr Yardney said.
Mr Pressley also expressed great concern for rising rent prices throughout Australia, predicting that asking rents for standard houses will increase by as much as $10,000 in 2022.
Every expert we’ve mentioned - Mr Pressley, Mr Yardney, Mr Paliwal, and CoreLogic - have predicted that international borders reopening will increase demand for rental housing and put pressure on rent prices.
"This is good news for investors who were caught in the apartment exodus and saw rents decline during this period," Mr Paliwal said.
"However, the impact of lower rates of vacancies will see more pressure on rental prices."
Capital cities have seen massive housing value growth over the past two years. But is this going to continue as international borders reopen and life returns to some level of normality?
Of the capital cities, Brisbane and Adelaide show ‘no signs of slowing down' according to CoreLogic, with growth rates hitting record highs in December 2021.
Specifically, Brisbane experienced a property price surge of 2.9% in December, with Mr Yardney calling it an ‘outstanding market performer’.
Mr Pressley agrees that Brisbane house prices are only going up, also adding in Hobart as another capital city to watch in 2022. He attributes Brisbane’s property price spike to 15 years of ‘suppressed market activity’.
"The economy of Australia’s third largest city is still not as strong as many other locations and commentary about internal migration and infrastructure investment is grossly exaggerated," Mr Pressley said.
"But the overall conditions are such that we anticipate growth of 25% to 30% in 2022, the strongest Brisbane will have seen since 2003."
As for Hobart, he said the capital city has been the best-performed market over the past seven years, and predicts housing prices will continue to grow by 20% in 2022.
“Tasmania has become home to the most precious real estate in the country. Hobart currently has 70% less resale supply than five years ago and only 97 dwellings advertised for rent,” Mr Pressley said.
As for Melbourne and Sydney, Mr Pressley believes the underlying of these cities are the ‘softest in Australia’. He predicts Melbourne, Sydney and Darwin will produce single-digit growth in 2022.
This can be backed by the latest CoreLogic figures which revealed that Sydney and Melbourne recorded the softest rates of growth since October 2020 in December 2021.
Mr Pressley also predicts Adelaide and Canberra will see growth in the high teens, and Perth will experience circa 10% property price growth.
Find out more about the best suburbs for investment over the next year
Mr Pressley believes regional Australia will be the ‘main beneficiary’ of the property boom, with Australia’s best property markets located ‘among 200 regional towns’.
As a result, he has predicted up to 30% house price growth for at least 20 ‘regional wonders’ in 2022.
“During the first 12-months of COVID-19, the population of regional Australia increased by 51,000, whereas the eight capital cities produced a combined 17,000 decline," he said.
Mr Paliwal also believes people will continue seeking sea or tree changes in 2022, as things like working from home and flexible working arrangements brought about by the pandemic have played a part in the bid to buy regional.
Mr Paliwal believes people opting for early retirement is the biggest driver of this trend.
“The pandemic made people rethink their living situations and seek a better lifestyle sooner," Mr Paliwal said.
"We saw people try different tactics to achieve retirement earlier by downsizing or investing. It’s not a new trend - it simply became supercharged during lockdowns - and will continue at higher than previously seen levels."
He also said that people have become more comfortable buying beyond their backyards, and that borderless buying will become the norm.
“The concept of virtual buying has been around for some time, but it has accelerated during the pandemic and through greater professional presence of buyers agents to make it easier to buy outside one’s own city or state and ease buyer’s concerns,” Mr Paliwal said.
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