Episode Details

What's ahead for property in 2022?

If you're curious about what will be affecting our property markets in 2022, you will love today's show, because Pete Wargent and I discuss 8 trends that will shape the property markets for 2022 and beyond.

Property trends for 2022

We experienced a wild ride in property in 2021, didn't we, so what's ahead for 2022?

While our property markets are slowing down as the year ends, there is still significant momentum, so the main factors which will determine what happens to property next year will depend on what the RBA does to interest rates and if APRA tightens the screws further on lending.

But despite the best predictions, if history has taught me anything, it is that there will be an unexpected X factor coming out of the blue to undo the most seasoned property forecasts, either on the upside or the downside.

However here are seven property trends I expect to happen in 2022

1. Property values will continue to rise

While many factors affect property values, the main drivers of property price growth are consumer confidence, low interest rates, economic growth, and a favourable supply and demand ratio.

As always, there are multiple real estate markets around Australia, but in general property values should increase throughout 2022, but at a slower rate of growth than 2021.

2. We're in for a 2-tier property market moving forward.

While most property markets around Australia have performed strongly so far this cycle, moving forward the rate of property price growth will slow and there are several reasons for this including:

• Affordability issues will constrain many buyers. The impetus of low interest rates allowing borrowers to pay more has worked its way through the system and with property values being 20- 30% higher than at the beginning of this cycle at a time when wages growth has been moderate at best and minimal in real terms for most Australians, means that the average home buyer won't have more money in their pocket to pay more for their home.
• The pent-up demand is waning – While there are always people wanting to move house and many delayed their plans over the last few years because of Covid, there are only so many buyers and sellers out there and there will be fewer looking to buy in 2022.
• APRA – is intent on slowing our markets using macroprudential controls

This will lead to a two-tier property market - in other words, not all locations will continue growing strongly moving forward.

I can see properties located in the inner and middle-ring suburbs, particularly in gentrifying locations, significantly outperforming cheaper properties in the outer suburbs.

3. Our economy will pick up

Households have squirreled away an estimated $200 billion this year, with the prolonged lockdowns in Australia's two largest cities keeping people indoors and spending less.

Some of it will go to paying down debt and some will go into buying assets. We're already seeing this in retail spending, and it's been apparent in our property markets throughout the year as many homeowners upgraded.

4. The "official" interest rate will remain unchanged

In my mind, the official RBA interest rate is likely to remain unchanged throughout 2022.

Australia's economy is still operating below its potential with economic growth and wages growth not strong enough to justify an interest rate increase.

5. APRA is likely to tighten its macro-prudential measures

APRA has only really tapped its foot on the brake pedal; it hasn't really pushed down hard on the brake to slow our markets down so if the property markets continue growing too fast for their liking, they are likely to introduce stricter measures.

6. A flight to quality