What’s in store for the property market for the rest of 2022?

Eleanor Creagh, senior economist at REA Group recently shared her thoughts on what’s in store for the housing market in 2022.¹ Here are some of her key take-outs.

1. 2022 will bring more balance to the housing market

Last year saw some big gains in property values around the country.² That was backed by three consecutive months of a rise in new listings, with November bringing a decade-high for new listings in capital cities. 

This trend has continued into 2022. That means buyers can expect an easing of the intense levels of competition seen last year as the market delivers more choice and an improved balance between supply and demand. Bottom line, we could see easing price growth in 2022.

2. It’s an upgrader's market

After the significant rise in property prices, many home owners are sitting on substantial equity. This is likely to add to strength in upgrader transaction volumes.

As COVID case numbers subside, buyers and sellers who’ve been sitting on the sidelines will have more of an opportunity to get out in the market, giving market activity a potential boost.

3. Units could make a comeback

The reopening of international borders should drive a return of skilled migrant workers and international students, and that’s likely to push up demand for units – especially inner-city rentals.

The premium of house prices over unit prices has reached record highs. But with home loan lending conditions tightening – and a return to more normal conditions placing pressure on rental markets, demand for units could rise as buyers look for affordable options.

4. Investors remain active

Investor activity picked up significantly in 2021 with the proportion of enquiries to real estate agents from investors currently the highest in two years. 

With units (often favoured by investors) currently more affordable than houses, the added pressure in rental markets and affordability factors could drive further investor demand.

5. Interest rates – it’s a mixed bag

The Reserve Bank of Australia (RBA) cut interest rates to record lows in 2020, fuelling record demand for property and sending house prices surging Australia-wide.

The RBA has consistently signalled that inflation needs to be within its 2% to 3% target range before it will lift rates. But there needs to be a significant pick-up in wages for the cash rate to rise this year. And right now, that’s the missing link. 

Until there is evidence of broad-based stronger wages growth, don’t expect interest rates to rise. The RBA is also likely to wait for at least two more strong inflation readings before raising the cash rate. And that may not happen until August 2022 at the earliest.

Even if the RBA holds out on rate hikes, variable rates are likely to creep higher this year, and fixed rates have already bottomed out. 

On the plus side, even though mortgage rates are likely to rise, they will remain historically low.

Talk to your Mortgage Choice broker to see how you can achieve your property goals, before rates head north.