How 2022 will change the property market: forecasts and predictions

Property markets across all of Australia experienced strong growth in 2021, but will it continue into the new year?

A property expert and buyer’s agent is cautioning buyers to be more strategic about their purchase decisions over the next 12 months, as the recent growth trends won’t continue nationally at the same pace.

Arjun Paliwal is the founder and Head of Research at InvestorKit, who says Australia experienced an unprecedented property boom in 2021 as households saved more cash.

Predictions are showing that the nation’s booming property market may not last – but the impact it will have in the long term is still up in the air.

Recent growth trends might not continue in 2022.

Property prices increased across the country during the pandemic and while supply remained low in capital cities, buyer demand on realestate.com.au remained at an all-time high off the back of government incentives.

“Government grants and stimulus packages propped up the economy, expats returned and purchased property, lifestyle became a higher than ever priority, interest rates remained low, existing housing supply took a nosedive, and all of this whilst an infrastructure boom is in play,” Mr Paliwal says.

“In 2022, we can expect property prices to be led by high demand in select areas extending their growth cycle rather than a blanket approach of low stock nationally, rental vacancies for apartments likely to decline as international borders open, a fall in first home buyer activity is expected in our major cities, and Aussies continuing to make a sea or tree change.”

InvestorKit Founder and Researcher Arjun Paliwal

Here are the seven property trend predictions for 2022:

1: First home buyer activity will decline

The volume of enquiries from buyers, typically owner occupiers, fell by 21.6 per cent in August 2021.

Despite this, interest from first home buyers and investors peaked with large monthly increases in enquiries.

“As property prices rose to such high levels this year, many first home buyers have been priced out amongst major markets. The biggest challenge for those looking to buy in 2022 and beyond will be their home deposit. While money remains cheap, benefits on offer with price caps attached aren’t very possible to stay under due to price growth”

2: Property prices will be demand-led rather than supply-short

Residential Houses - Bunbury - Australia

Property price growth in early 2021 had one common factor: markets had low stock which led property prices to shoot up.

Mr Paliwal says many locations will see growth rates reduce as listings return to ‘more normal’ levels.

“Many areas carry a multitude of reasons for their respective cycles to continue: localised strength in their economies, the continuation of the exodus, affordability, weaker last 10-year rates of growth paving way for a greater cycle length and high current market pressure. These areas are expected to be the majority when counting the total number of cities in Australia seeing high demand.”

3: The seachange and treechange will continue as Aussies bring forward their retirement plans and continue flexible work

Homebuyers desperate to escape the city post-lockdown decided to make the move to both the coast and regional areas.

The bid entices people away from the city and also brings less traffic and creates more jobs in regional areas with a more flexible life balance.

“The pandemic made people rethink their living situations and seek a better lifestyle sooner. We saw people try different tactics to achieve retirement earlier by downsizing or investing. It’s not a new trend - it simply became supercharged during lockdowns – and will continue at higher than previously seen levels.”

4: Borderless buying will become the norm as investment decisions increasingly become driven by data.

People are rethinking their living situations and seeking a better lifestyle.

Being well informed about markets helps investors spot opportunities quickly. While there will always be opportunities in capital cities to make a profit, savvy investors are getting outside their comfort zones and looking further afield.

“The concept of virtual buying has been around for some time, but it has accelerated during the pandemic and through greater professional presence of buyers agents to make it easier to buy outside one’s own city or state and ease buyer’s concerns.”

5: Growth won’t occur at this pace again across all markets, there will be variances across micro markets

“Unlike in 2021 when property markets across all of Australia increased, it’s important that investors don’t go into 2022, thinking that they can just buy anywhere and the same upward trends will happen again. Each micro market will have its own factors influencing growth.”

“The last time growth occurred on a national scale in this similar fashion was 2000 to 2004.”

6: Apartment rental vacancies will trend down and add pressure on rental prices

Residential unit complexes in Sydney.

As international borders reopen and skilled labour immigration and international students return, apartment rentals will recover as younger immigrants are more used to overseas apartments.

7: More people will buy property through their self-managed super fund (SMSF)

As long as the market and interest rate remains competitive, investors will have the opportunity to take charge of their own financial future.

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Originally published as How 2022 will change the property market: forecasts and predictions