Yahoo Finance Lockdowns, incentives: Where the property market is headed in 2022
Property prices just keep going up and up - so much so that Aussies are pricing themselves out of the market. But surely it can’t go on like this forever.
How high the market will go by the end of the year is up for debate.
Fitch Global predicts it will rise 16 per cent and recent Commonwealth Bank analysis predicts 20 per cent, but with the rapid spread of the COVID-19 Delta variant, things may change.
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Here is a look at where the property market is currently, and where it could go heading into 2022.
Lockdowns have had little impact
Lockdowns preventing Aussies from leaving their homes has done little to subdue the market.
In fact, even with some of the harshest restrictions the country has seen, listings have only dropped slightly while clearance rates are through the roof.
Sales continue to surge across Australia with around 171,000 sales in the three months to July, according to CoreLogic.
That is 53 per cent higher than it has been for the last five years.
Despite a ban on onsite auctions, July saw strong auction clearance rates in all capital cities, according to the Domain Auction Report for July.
Melbourne had almost 5,000 auctions scheduled with 69.3 per cent clearance rate, this is the highest result for the month of July since 2017.
Sydney followed suit with 3,472 scheduled auctions, the strongest July performance since 2016.
Prices keep rising - but why?
So despite thoughts the market would see a drop off in a nation closed down, it seems the market's resilience is strong.
CoreLogic said there are three main reasons for this.
1. Low mortgage rates
Increased buyer demand has stemmed from continuously falling mortgage rates.
Despite earlier concerns that mortgage rates might be listing sooner than expected, RBA data found average home loan rates actually fell 0.12 per cent in the first half of this year.
2. A savings windfall
Aussies are spending less money because they’re stuck inside and coupled with an increase in Government support initiatives, some found themselves with more savings in the bank.
Household savings peaked at 22 per cent of household income in the June quarter of 2020, which was above the then-decade average of 7 per cent.
Combined with a range of incentives for Aussies to buy homes, those savings were put towards a home deposit which triggered a rise in sales.
3. Incentives for first home buyers
2020 saw the introduction of multiple first home buyer incentives, from the first home loan deposit scheme before the pandemic, to various state-based grants and concessions, along with incentives for the purchase and/or construction of new or off the plan property.
Will prices drop?
Yes and no - most experts predict an easing of growth rather than a backflip.
CBA head of Australian economics Gareth Aird said he expects Aussie property prices to rise 20 per cent by the end of this year, but only 7 per cent next year.
So, while prices will still be rising it will be at a much more reasonable rate than we have experienced so far.
“Price growth is expected to moderate in 2022 on affordability constraints, but very low mortgage rates will continue to be a tailwind on the property market,” he said.
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