What is the housing market prediction for 2022?

Predictions for the 2022 Real Estate Market from Australia’s Industry Experts

From interest rate rises to undervalued suburbs in Metro areas, our experts cover what buyers, renters and sellers need to know when it comes to property in 2022.

Nerida Conisbee, Chief Economist, Ray White
“As the borders open, rents will rise.”

One of the more surprising impacts of the pandemic, given that we have seen more people leaving Australia than arriving, has been the sharp rise in rents in some locations. While international migration was paused during the pandemic, we did see high levels of interstate and intrastate migration to regional areas and to South East Queensland. The areas that attracted people saw high rental demand, and a flow-on from this was strong growth in rents. Borders reopening will increase demand for rental housing. When people move to a country or region, most rent first. In addition, foreign students are returning which will also increase pressure on unit rents close to education facilities. As to how much, it will depend on the pace of international migration, as well as how interstate migration trends change.

Jason Spencer, Co-CEO Homely.com.au
“Return to work signals the return to normal.”

The listing volumes we’ve seen coming through Homely.com.au in January and February were significantly up on previous years. It’s looking like a seller’s market – it’s clear vendors are looking to capitalise before the rate rises impact borrowing costs. Inflation is still the larger concern across the board. We are seeing rate hikes in the US and the expectation is we will follow suit here in Australia. However, I believe demand will significantly outstrip supply given we have such limited stock in our metro areas.

The CBD will see most offices now back to normal. I do expect the markets to rebound rapidly once the impact of Ukraine and sanctions are priced in. Here in Melbourne, we are seeing a return to work with the lifting of work from home rules.

Avi Khan, Principal Ray White Marsden
“Rental increases will drive demand for bigger properties.”

2022 has started with a bang! We’re seeing strong auction results driving the momentum throughout Brisbane. We are also seeing a lot of conflicting predictions of price growth and of a market slowdown. Our advice to buyers and sellers is: to transact in the market that you know rather than looking at predictions for the future – they almost always disappoint.

Australia ended 2021 with house prices up 21 per cent compared to the start of the year. While at this stage, it is looking like house price growth will continue, albeit at a slower pace, rental levels are set to accelerate. The rental market is a key driver for property price growth, as rents rise, purchases become more attractive to investors. In 2021, closed international borders meant that rental increases were driven entirely by interstate population movements as well as increase in demand for bigger properties.

Graeme Wilson – Principal, Wilson Agents
“We’re seeing vacancy rates getting back to normal.”

Now that the focus is shifting on interest rate rises it would be best for buyers to get in while they can and lock in a good deal! Long term rates are moving on an upward trajectory with several increases predicted over the calendar year. If rates do go up, it will no doubt create some hardship to those heavily geared, so it is important not to over commit yourselves.

Given the roller coaster ride of the current stock market with heavy influence of external factors from Covid plus high inflation in the US, as well as the Ukraine war, we think Bricks and Mortar will continue to be a great investment.

Property management found the market to be extremely challenging through the Covid era. Vacancy rates through the inner city were hardest hit with many experiencing vacancies being at levels of up to 45%.

Now that things have eased with our borders reopening and international travel allowed, we expect and are seeing vacant properties are being mopped up. Levels are getting back to normal – levels of around 4-5% reducing day by day.

Hayden Grove, President Real Estate Institute of Australia (REIA) and Principal & Director dethridgeGROVES Real Estate.
“It’s a seller’s market.”

With inflationary pressures growing throughout 2022, the prospect of interest rate rises sometime this year has become more probable. The impact on markets across Australia will be varied, but any rate rise is not likely to see substantive or immediate falls in property values. Those areas that witnessed significant 30% plus rises in 2021, such as Sydney and Hobart, are not likely to repeat those feats again this year as affordability constraints take hold. 

Other markets to watch are the regions and the WA market, which has not performed as well as east coast markets and remains below 2014 peaks. Stock levels are likely to stay low in the first half of the year with more supply coming to market as market growth rates peak. Skills shortages, rising wages and work-from-home preferences will continue to underpin regional property demand. Overall, a sellers’ market is likely to prevail for 2021. 

The shortage of property managers adds to the challenges. Vacancy rates are likely to squeeze in Melbourne and remain tight in remaining cities and regions, although some vacancy rates will ease as build completions peak mid to late 2022. Rents should stabilise in most capital cities but we will see these rise in Perth, Brisbane and regions.

Scott Spencer, CEO Well Home Loans
“Buyers will be able to borrow less.”

Many economists are adamant that the cash rate will be increased this year, despite the RBA’s forecast that it may be some way off.  Most lenders are already pricing in increases in their cost of funds with fixed interest rates and these are rapidly climbing, with changes coming almost every month.

With an increase in interest rates, many are worried about the Australian households carrying large debts and what a small increase to interest rates could do to the average family. Mortgage stress is a common result though recent data from at least one major bank has shown that Australians have saved a lot of money during the pandemic and that an increase in repayments could be absorbed without too much trouble by a lot of their customers.

APRA has also stepped in and asked ADIs to reduce the borrowing power of many property buyers by increasing their servicing buffers by half a percent. This means that during 2022 those looking for real estate will be able to borrow less, naturally having an impact on real estate.  

Tristan Tomasino, Managing Director and Auctioneer, Buxton
“Look for undervalued areas.”

I believe we are in a stable market for the rest of 2022. Properties will still sell, but certainly not with the fierce competition we saw last year. This means vendors and buyers will be able to achieve a fair price. In our core market being the Inner West, the next growth suburbs would probably be West Footscray and South Kingsville. These areas are still undervalued due to their location, but have bigger block sizes compared to surrounding suburbs such as Yarraville, Seddon and Kingsville. Due to the federal election and talk of interest rate rises later this year, there are certainly some cautious buyers out there waiting to see what happens.  

Andrew McCulloch, CEO Ray White, NSW
“6% growth in capital cities.”

There were a lot of moving parts in the marketplace over the past 12 months. We’ve obviously had the pandemic, and naturally people were nervous but we saw a change in prices – the banks said there was going to be a 30% decrease but in fact there was a 30% increase. From then, people knew we were in a buoyant market and we saw exuberant confidence. We also saw what people assumed was a lack of stock, but in reality stock wasn’t the problem – it was moving so quickly it just felt like a lack of stock. This kept prices going up.

As we tipped over Christmas, we expected to see what we normally see – a flood of listings around Australia Day. But, this didn’t happen. This was partly media-driven, partly because of talk of interest rate hikes in the new financial year. And, alarmingly, the situation in Ukraine at the moment. These are all things people take into account when thinking about property. However, I don’t believe we will see the market fall. Interest rate hikes don’t mean we will have a bloodbath as many people are on fixed rates. What we might see is an adjustment in growth.

I predict 6% growth this year in major capital markets. I also see this as a national figure, given all the factors I’ve mentioned are national concerns. We have had such a strong market so rather than a drop, we’ll see a decline in growth.

Final piece of advice for vendors, buyers or tenants?

Hayden Groves – affordability is likely to improve.

Most of the gains in property values over 2021 will hold but as wages rise and the pace of growth slows in most cities, affordability is likely to improve. And keep an eye on the pollies as the election nears; they might be inclined to offer some sweeteners to assist first home buyers.

Andrew McCullough – don’t sell off-market.

Another thing we saw last year that will hopefully not carry forward into this year is off-market selling. Lots of people sold off market, which meant listings didn’t hit the portals. Honestly, this is the worst thing you can do as a vendor if you’re trying to get a good price. 

Going to market and creating competition through auction means you will nearly always get more. I like buying property with a price on it because I always get it cheaper!

Graeme Wilson – buyer trends are being driven by price.

Buyer trends appear to be driven by price at the moment and buyers will move more likely to the next most affordable location that they can. Shortage of property in highly sought after inner city localities will always be in demand.

Avi Khan – demand for rentals and apartments will grow as borders open.

In 2022, we will see another increase in demand as international borders reopen. This is great news for investors. This increase in rental demand will also kickstart a new construction cycle – expect to see more apartments to buy and rent in 2023.

Tristan Tomasino – don’t cut marketing corners.

In saying all of this, properties well-presented that have a realistic price guide and are well marketed will always do well. Vendors can’t afford to be too ambitious or cut corners with marketing or presenting their property for sale could jeopardise the sale result.

Scott Spencer – tightening borrowing levels will affect what you can afford. 

With 2022 being the year that APRA has asked banks to keep a closer eye on household borrowing levels, the natural flow on effect that many economists are predicting is a slightly higher house price value before slipping over the next few years.