La Nina is bringing ALL the rain, and while there’s a risk it could dampen our spirits, will it have the same cooling effect on the white-hot property market?!
Fuelled by record-low interest rates, the Australian property market was hotter and more resilient than ever as 2021 came to an end, unchanged by the ongoing lockdowns across the country. Fixed-rate mortgages, intervention from the Australian Prudential Regulation Authority (APRA) and an increase in supply point to an inevitable slow in price growth, but could an increase in consumer confidence and the opening of borders continue to put upward pressure on prices?
The market at a glance
According to Domain’s latest House Price Report, house prices nationally are up 21.9% year-on-year (YOY). Canberra saw 32.4% YOY growth, the biggest in the capital’s history and the most substantial growth nationally. Over the same period, Sydney house prices rose by 30.4%, Melbourne 16.8% and Brisbane 15.3%.
According to CoreLogic, Brisbane and Canberra are yet to experience a slowdown in the monthly growth rate, while Sydney and Melbourne have begun to show signs of the growth rate steadying. This is likely linked to the stock level on the market, with Brisbane supply levels in November, for example, -33.9% lower than the five-year average, whereby Sydney listings were sitting just -2.6% below the five-year average.
Factors that will influence the market in 2022…
Interest Rates
Just as low-interest rates are at the heart of rising property prices, increasing rates will play a significant role in moderating the market. Banks are already lifting rates for fixed mortgages, and while the effect of this rise won’t be felt immediately, it will slowly guide the market into a correctional stage.
The Reserve Bank of Australia is expected to lift the official cash rate from a record low of 0.1% to 1.25% by mid to late 2023. This increase will directly impact affordability. However, house prices will continue to remain strong throughout most of 2022.
APRA
The Australian Prudential Regulation Authority (APRA), an independent authority that supervises financial institutions and promotes financial stability, is determined on slowing the rate of house price growth across the country.
In October this year, the bank regulator reduced the maximum amount that home buyers can borrow, with banks now having to re-assess whether potential borrowers will still be able to manage their loan if interest rates rise above their mortgage rate. Continued intervention from APRA will potentially slow the growth of Sydney and Melbourne house prices more than it will the rest of the country as these two cities have the most overvalued house prices.
Migration
While interest rate hikes combined with APRA interference is likely to put downward pressure on house prices, the return of international migration could translate to continued growth. As borders reopen to migrants and returning ex-pats, a price slow could be suppressed, particularly for Sydney and Melbourne, where migrants tend to congregate, and to a lesser degree in Brisbane and Canberra.
So, where does this leave us?
After a solid year for house price growth, we should see the market consolidate in late 2022 – welcome news for hopeful buyers. For existing homeowners looking to upgrade, downsize or move, 2022 will be as great a time to sell as many, with the house price surge directly linked to an increase in equity.
Are you thinking of making a move in 2022? Start your property journey #teametchells
Donna Etchells - McGrath Estate Agents 