After a record year last year, the 2022 real estate market has a lot of potential. Explore eight major trends.
Strong demand, limited supply of real estate for sale, and record low interest rates combined to create a complete storm in the rise in home prices in 2021.
But the real driving force was the ongoing reassessment of lifestyle needs and housing needs by Australians. This, coupled with cheap borrowing costs, has allowed many to pay larger mortgages and larger budgets.
The arrival of the Omicron strain reminds us in a timely manner that, despite our best efforts, predicting a year ahead is often an uncertain movement.
Still, we will consider some of the major themes that may drive residential real estate over the next year.
2022 will bring more balance to the housing market
More choices and less competition
2021 ended very differently from the way it started.
New listings have increased for the third consecutive month, and in November, new listings in the capital increased for the first time in 10 years. Relaxation of COVID restrictions in New South Wales and Victoria has increased seller confidence and made buyers take advantage of the available options.
This trend continued until the New Year, with January 2022 being the busiest new listing in eight years across the capital. Sellers are expected to continue to see new listings in early 2022 in response to strong price increases. This means that some buyers can expect the fierce competition seen in 2021 to ease.
Greater willingness from the seller List those properties It means more choices and better balance between supply and demand. This should also help mitigate inflation this year.
More sellers will be confident in listing their property this year.Photo: Getty
Slow price increase
Price growth slows from the rapid growth seen in 2021
Already high home prices, along with mortgage bottoming out, will delay annual price increases. Savings from low interest rates are quickly absorbed by rising house prices, and the reasonable push to affordable prices by low interest rates expires.
This will help slow the pace of price increases in 2022. In addition, a change in the Australian Health Regulatory Authority’s macroprudential, which came into effect at the end of last year, has moderately reduced the borrowing capacity of new buyers.
But even if last year’s runaway is mitigated, next year’s annual price increases may still be comparable to or exceed the long-term trend.
Price increases will slow this year, especially in markets like Sydney, but will not level off everywhere.Photo: Getty
It’s a market for upgradeers
Equity gets a tailwind of activity
Due to the experience of telecommuting arrangements and blockades, many buyers want a larger home and more space. And after a significant rise in home prices, many existing homeowners are sitting in considerable fairness.
This combination can enhance the transaction volume of the upgrader, especially as lifestyle preferences are still complex. With the advent of Omicron, the need for remote work has been further extended.
We hope that as the cases fit, this year we will be less hindered by the restrictions. Buyers and sellers who have been refraining from doing so will have the opportunity to trade undisturbed, providing a new tailwind for their activities.
However, the widening number of homes and price differences in homes this year will make it difficult to upgrade condominiums that are considering buying a home.
A unit to make a comeback?
Immigrants and international students return the driving demand of the unit
The reopening of the border and the subsequent return of skilled migrant workers and international students could increase rental demand in the city center.
Rents have skyrocketed in rural areas, but have remained nearly flat or declining in central Tokyo due to pandemic-induced changes in taste. Almost two years after the blockade of COVID-19 first emptied an apartment in the city, demand could be set to recover as life returns to CBD.
Home price premiums have reached record highs, and the pandemic is driving one of the biggest changes we’ve ever seen in terms of home preferences. However, as credit conditions become tighter, migration normalizes and pressures on the rental market, demand for units can increase as buyers look for affordable options.
After a period of flatter price increases, units may be set to spike.Photo: Getty
Investors remain active
Future landlord looking around
Investor activity recovered significantly in 2021. This is another reason why the demand for units can increase. The percentage of inquiries from investors to real estate agents is currently at the highest level in more than two years.
Investor loans have higher interest rates than usual, so increasing APRA to the conservative buffer applied to new mortgage applications will have a greater impact on investors than homeowners.
With this in mind, and given the units that are historically cheaper than homes today, additional pressure and affordable factors in the rental market can drive demand.
Investor mortgage demand has risen from a record low of about 20% for new lending to more than 30%, and APRA has moderately tightened credit terms, allowing investors to take advantage of rent collection and unit discounts. You may consider doing it.
Demanding South East Queensland
Olympic sprint begins
In southeastern Queensland, prices are still rising rapidly after years of modest growth, supported by affordable prices and strong demand from interstate immigrants. The Brisbane, Gold Coast and Sunshine Coast markets may continue to be popular for some time to come.
The region is set to benefit from interstate demand, but another positive factor is spending on infrastructure until the 2032 Olympics. As the game approaches, infrastructure investments, transportation upgrades and job creation pipelines will continue to drive real estate demand. This is a positive factor for these regions.
Affordability, lifestyle appeal, and increased investment leading up to events will drive continued real estate investment in Queensland over the next year.
The Brisbane market is in the midst of a major price boom.Photo: Getty
Local market where you can commute
Still out of town
The desire for a lifestyle location near the beach was an important feature of the 2021 real estate market.
The telecommuting boom has helped increase the value of changing places in the ocean and trees, as it means more choices of places where people can live by being no longer tied to the office.
The pace at which this change is felt may ease, but areas with good connections and commuting will continue to be in high demand. For many, working from home will continue to be the 2022 standard. We expect demand in coastal, rural, and seaside suburbs to remain high this year.
Some people prefer relatively affordable housing in the area because the tendency to work from home reduces the need to live near the office. This is especially true for Sydney compared to other regions.
In addition, prices may continue to rise, albeit with significant price cuts, as the supply of properties available for sale in rural areas remains limited.
Degree of interest
Wage growth MIA
The Reserve Bank lowered interest rates to record lows in 2020, stimulating record demand for real estate, resulting in a surge in home prices across Australia.
The latest inflation data is stronger than expected, and many have pointed out the possibility of a rate hike in June this year. This is a significant compression of the 2024 timeline notified by the RBA just a few months ago.
This raises interest rates on mortgages, raises borrowing costs, and reduces the amount people can borrow. This is a price-increasing handbrake.
But before the RBA raised interest rates, Philip Lowe has consistently emphasized both inflations. When Wage growth is a necessary prerequisite. The RBA’s recommended base inflation (truncated mean inflation) indicator could return to within the 2% to 3% target range, but wages will need to rise significantly to raise cash rates this year.
Reserve Bank Governor Philip Rowe is watching wage growth as a prerequisite for rate hikes.Photo: Getty
Wage growth is the number one determinant of sustained inflationary pressure (what the RBA wants) and is currently a missing link. Importantly, the RBA is waiting for wage growth to approach 4%.
If the labor market continues to strengthen at its current pace, it is likely that it will continue to progress faster than expected, leading to a rate hike in 2022. But don’t expect interest rates to rise until there is evidence of widespread and stronger wage growth. The RBA may also wait for at least two powerful CPI prints before raising the cash rate. This will make August 2022 as early as possible in that regard.
However, even if the RBA lasts until late 2022 or early 2023, mortgage rates could rise regardless. Fixed rates have already bottomed out and floating rates could be higher than this year. Mortgage rates can rise, but have historically remained low.
That is, it does not coincide with the historic year of 2021, but 2022 is expected to be a powerful year for housing.