In this era of uncertainty, we take a look back at the housing market trends that impacted the second half of 2021, as well as the major aspects to watch in the first half of this year.
The property market in Australia is expected to grow by 3.8% in 2022, according to the latest research from CoreLogic. The growth will be driven by increased demand for properties, as well as a relatively stable supply of new properties and predicted house prices by 2030 Melbourne can go way higher. The research also found that the Sydney and Melbourne markets are expected to grow at a faster pace than the rest of the country, with prices expected to rise by 3.9% and 4.1% respectively over the next three years. The report also found that there is an increasing number of people looking for rental accommodation in Sydney and Melbourne, with rental vacancies declining by 0.5% and 0.3% respectively over the past year alone
Most observers were astonished by the surge in property prices during the pandemic, but can price strength hold in the midst of inflation?
Due to the ongoing effects of COVID-19, as well as related disruptions to global supply chains, loosening of monetary policy by central banks around the world, and more lately, war in Eastern Europe, the Australian property market remains unstable.
In the second half of 2021, technology was at the forefront of important trends due to heavy lockdown restrictions reinstated in major cities across eastern Australia, including Sydney, Melbourne, and Canberra.
Despite the lockout that damaged other areas of the economy, the property market managed to function properly.
This was accomplished via the use of high-tech approaches such as remote inspection and online auctions.
Internal migration by Australian residents was slowed by COVID-19-related travel restrictions and lockdowns, while immigrants were kept out while international borders remained closed.
As a result, there was a shortage of rental and sales listings, which contributed to additional increases in property prices.
Sydney, Melbourne, and Canberra started to restore some normal economic activity since the Lockdown measures were lifted by the end of 2021.
Melbourne Airport saw its first foreign passenger flight since March 2020 in November last year, with journeys to and from Singapore.
With the restart of international travel, a major source of real estate demand in the shape of new migrants and foreign investors returns to Australia.
The real estate industry's use of high-tech tactics to deal with lockdowns aided sales and continued price growth.
According to Corelogic data, the value of a home in Sydney increased by 25.23 percent in October compared to the same period previous year.
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Reserve Bank Governor Philip Lowe stated at the beginning of February that there is no urgent need to raise the cash target rate from its record low of 0.1 percent.
Although Lowe stated that a sustained higher trend in real wages was required to justify interest rate hikes, many analysts believe that increasing inflation will force the RBA's hand before the end of the year. Low interest rates, on the other hand, will provide solid support for price levels in the Australian home market. By the end of the year, we expect the official cash rate to rise to 0.75 percent.
Despite the long-term impacts of the COVID-19 epidemic, Australia's GDP is anticipated to grow by 4.1 percent in 2022, according to the OECD.
Employment levels are among the highest on record, and business and consumer confidence are high, however any hint of out-of-control inflation might lead confidence to plummet dramatically. The unemployment rate had plummeted to a 50-year low of 4%, according to government data released in mid-March.
Following the restart of international travel, there is the potential for increased upward demand on home rents, and we welcome the return of foreign students and new migrants after a two-year absence.
The sudden spike in demand could put even more upward demand on rental rates for both houses and apartments.
Housing prices will continue to rise until 2022, but at a slower rate than during the post-COVID-19 price boom, which saw price increases of more than 20% in key cities.
Instead, market consensus predicts a full-year increase in average national house prices of 5 to 7% in 2022.
Existing Australian residents will be able to resume internal migration once the lockdowns and border restrictions are lifted. This will create fresh supply in areas where residents are leaving, as well as new demand in areas where internal migration is most appealing.
Following a boom that has resulted in decreasing affordability, the concentration of significant price rise is anticipated to shift away from Australia's two largest cities, Sydney and Melbourne. Given its desirability as a location for interstate migration, Hobart is likely to be the capital city with the fastest growth.
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If concerns about house affordability grow, or if a rising property market is seen as a threat to financial stability, APRA is likely to step in again.
The outcome of the federal election could have a significant impact on property policy.
Labor has pledged to limit negative gearing for newly constructed houses, as well as reducing the capital gains tax deduction on investment properties held for more than a year to 25% from 50%. Labor has been rumoured to be dropping these measures in recent weeks, but no formal statement has been made and may not happen until after the election.
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