The ability to predict what is going to happen in the property market for the coming year has never been easy but now it’s even more complex. Will property prices continue to increase across Canberra? Will the migration from city areas to more rural regions in NSW, Qld, and Victoria continue?
No-one knows for sure. All we can do is look at the trends and what is happening around the country to try and understand what these might mean for the real estate market in 2022.
2021 Was An Exceptional Year
Those of us in the property market know that 2021 was quite an unusual year, thanks to the pandemic, continuous lockdowns, and uncertainty in what was happening in the economy.
Property prices around the country rose at an enormous rate and demand for properties was at an all-time high. We can all agree that this kind of growth cannot be sustainable long-term.
For example, property prices in Canberra rose by an enormous 23.8% over the past 12 months according to data from CoreLogic with the median value of houses in Canberra at just below $910,000. Data released on the 1st of March, 2022, also shows that prices rose by 3.1% over the past quarter and only 0.4% over the past month (February). This would indicate that price rises are starting to slow down, somewhat.
Affordability Is Becoming An Issue For Many Buyers
Many people have seen their incomes decrease over the past couple of years and although some are able to bounce back, for others it won’t be as easy. According to the report by CoreLogic, wages have only increased by 3.3% between March 2020 and December 2021 while housing values around the country have risen by 22.6%.
This not only means that it will be much harder for first-home buyers to get into the market but those people who are looking to upsize will have to find a way to justify the extra expense and make cuts to their overall spending to afford the higher mortgage repayments.
The Re-Opening Of International Borders Will Have Some Effect
In the past two years, we saw a lot of people either relocating to regional areas or purchasing a second property to use as a holiday home instead of traveling overseas. Now that the international borders have re-opened, will these people look at selling their second property to begin traveling again? If this happens, we may see an increase of properties back on the market.
Or, it could be a case that these property owners may keep their holiday homes and rent them out instead. This could certainly take some strain off the current rental crisis right around the country.
Additionally, the return of overseas students will put a strain on rental demand, especially in inner-city areas that are close to universities and public transport. This could be good news for investors who have or are looking to purchase units or apartments in the inner city of Canberra.
Increased Borrowing Regulations From APRA
APRA is currently tightening up borrowing regulations and has instructed banks and other major lenders that borrowers must now be able to meet their repayments at 3 percent higher than the current loan rate.
So, for example, if the current mortgage rate is around 2.3%, it’s the responsibility of the lender to ensure that the borrower can still afford to make repayments if the rate rose to 5.3%. This could certainly make it more difficult for people to take out a mortgage even if interest rates remain steady for the next 12 months.
In summary, it’s quite difficult to predict what is going to happen to the real estate market in 2022 but it’s likely that prices will continue to rise but at a slower pace. There is also likely to be an increased demand for rental properties, especially in inner-city areas as international students return to our universities – keeping rental prices at least at their current levels for the time being!