Now that we have two months of data under our belts, the direction of Australia’s property market for 2022 is becoming clearer.
Last year, property values increased in almost every location around Australia, and that’s very unusual.
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Around 98 per cent of locations across Australia recorded price uplift. Most had double-digit growth and the value of many properties rose by more than 20 per cent.
However, moving forward, the various property markets will be very segmented, which is a more “normal” property market.
In other words, in 2022 the value of properties in some locations will rise strongly, some will increase in value moderately, properties in some locations will languish as affordability becomes an issue, and a few areas will experience falling property values.
This is all based on local demographics, economics and supply and demand.
Melbourne and Sydney markets flat over February
Despite strong buyer and seller activity, our housing markets experienced strong auction clearance rates through February, clearly still indicating a seller’s market, however property price growth across the month produced mixed results.
Andrew Wilson's My Housing Market showed strong growth in asking prices for properties in Brisbane and Adelaide, while house price growth in Sydney and Melbourne moderated.
This fragmentation of our property markets clearly reflects the differing affordability levels between the capitals.
If you think about it, while wages around Australia are much the same, the median house price in Sydney is double that of Brisbane and considerably more than a similar house would cost in Melbourne.
And considering wages have hardly increased, yet property values soared by 20 per cent or more last year, affordability is now constraining further price growth in Sydney and Melbourne because lending capacity has been maximised.
“The smaller capitals – particularly Brisbane and Adelaide - continue to provide buyers with affordability advantages as strong demand continues to push up prices at similar extraordinary levels to those recorded by Melbourne and Sydney last year,” Wilson said.
So, what’s ahead for our housing market?
While demand for housing will remain strong, it’s likely we will experience lower and more fragmented price growth this year.
Overall, house prices are likely to increase in the order of 4-5 per cent in Melbourne and Sydney but Brisbane and Adelaide are likely to outperform with stronger growth.
At the same time, low vacancy rates at a time of increasing demand will make 2022 a year of solid rental increases.
“Housing market demand will continue to be supported by the imminent reintroduction of mass migration and rising confidence in a post-COVID, recovering economy and reinforced by a clear underlying shortage of housing,” Wilson said.
“Investor activity will also continue to support housing markets, with surging rents enhancing yields and supporting total returns.
“The level of price growth however will be determined by interest rates and income growth going forward, which are likely to remain steady for the foreseeable future.”