With 2022 fast approaching, Chief Economist at Ray White Group, Nerida Conisbee, has provided her expert predictions of the Australian property market for the next 12 months.
Will price growth continue as rapidly as 2021? What will the regional property market look like? Will Australians continue migrating north up the coast? Ms Conisbee shares her outlook.
- More price growth
Next year, we will most likely not see a sharp decline in house prices, as we’re heading into a time of strong economic growth, and business and consumer confidence is high. However, Ms Conisbee predicts we’re unlikely to see the same growth rate over next two years as the past two years.
She says there are three possible scenarios which could slow the market down, barring an unforeseen event. First is a growth in the number of properties for sale, second is a rise in interest rates, and third is an implementation of heavy finance restrictions.
Now that lockdowns have primarily ended, the number of properties being put on the market has increased, which appears to be slowing down the market with a slight drop of average active auction bidders. This won’t lower prices though, just slow pricing down.
Ms Conisbee says it’s too early to tell whether there will be an interest rate rise, but there will be one before the date expected by the Reserve Bank of Australia in 2024. Inflation is the key indicator to watch and is expected to be temporarily higher than usual in the coming quarters. If it is higher, she says there won’t be a 2022 interest rate rise.
Further financial restrictions are likely to be put in place early next year and have already begun to be implemented, but with a relatively light touch. Ms Conisbee says the Australian Prudential Regulation Authority are positively moving carefully with this.
- Regional shift to continue but at a less rapid rate
The biggest move to regional Australia ever recorded is happening right now and began at the start of the pandemic. Ms Conisbee says this shift will likely continue, but is unlikely to be as strong. Regional Queensland, NSW and Victoria saw the largest population increases, and she says this could be attributed to strong mining and agricultural conditions, a lifestyle shift, and greater demand for second homes and more space.
- Northern migration to continue
Northern NSW and South East Queensland have seen a flood of migrants since March 2020, and Ms Conisbee says this trend is likely to continue into 2022. With state and territory borders reopening, Queensland is likely to continue to increase its residents, while the number of people moving to NSW will likely slow.
- Luxury property to continue to be a strong performer
2021 saw record high demands for luxury properties, and while it’s unlikely 2022 will exceed those records, Ms Conisbee says the sector will still be a strong performer. However, restrictions to finance are less likely to influence luxury properties and is set to drive down prices in early 2022.
- Revitalisation of our CBDs
Set to be the year CBDs return to their glory, 2022 will likely see a rise in people coming back to the now ghost towns and revitalise the spaces into the vibrant and exciting places they once were. This will be due to overseas students, office workers, retail and entertainment returning, and will be helped by local governments focusing on getting activity back to the central areas.
- Rental acceleration to gather pace as borders open
Ms Conisbee says the borders reopening will create an increase in demand for rental housing, as people tend to rent before they buy when moving country or region. In places where they’ve seen mass interstate and intrastate migration, like regional areas and South East Queensland, rental demand will continue to be strong, flowing on from their 2020 increases.
- Construction costs to moderate as supply blockages become unstuck
Higher costs for within the construction sector was a major contributor to the 2021 September quarter’s high inflation, and Ms Conisbee says it’s likely this increase will continue in the beginning of 2022 but taper off in the second half of the year.
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