Sydney house and unit prices forecast to grow as RBA cash rate holds for February

The price boom looks all but over, however homeowners are still likely to make a nice little earner on their houses and units this year.

Sydney house prices will likely grow further in 2022 due to supply chain issues and staff shortages in the construction industry, a Finder survey has found.

Out of the 36 economists and market experts who took part in the study, 62 per cent indicated that the shortage in labour and supplies caused by the pandemic would put further pressure on the construction industry and drive overall property prices higher.

In Sydney, this equated to a 3 per cent increase in house values, which would bring the median price up $46,895 from $1,350,000 to $1,396,895 by the end of the year. Apartment values were forecast to grow another 2 per cent in 2022, or about $18,960.

Sydney house prices could continue to rise in 2022 despite speculation around a cash rate rise. Picture: NCA NewsWire / Gaye Gerard

The findings came as the Reserve Bank announced no change to the cash rate in its first policy meeting for the year on Tuesday.

Finder head of consumer research Graham Cooke said the record growth that Sydney had experienced during the pandemic wouldn’t last forever.

“The house-price explosion of 2021 is coming to an end, but has not stopped,” Mr Cooke said.

“We expect to see more moderate, but still significant, price increases in 2022. However, there’s double-trouble for prospective buyers. On top of bigger prices, expected cash rate increases will make borrowing more expensive.”

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“Once this happens, we can expect housing demand to gradually ease and growth in property prices to stabilise.”

Many of the experts surveyed said they expected a cash rate hike as early as the second half of 2022.

Independent economist Saul Eslake said a rate rise ahead of the RBA’s previous forward guidance seemed probable.

The Reserve Bank of Australia kept the cash rate on hold during its first policy meeting of the year. Picture Gaye Gerard / NCA NewsWire.

“I think it’s likely that the RBA will start raising interest rates in the second half of this year, given that inflation does now seem to be well within their target band and likely to remain there, almost a year ahead of the RBA’s own expectations,” Mr Eslake said.

AMP Capital chief economist Shane Oliver held an optimistic view.

“The economy is running stronger than expected, unemployment is likely to push below 4 per cent and this will drive an acceleration in wages growth to a 3 per cent greater pace in the second half – meeting the conditions for an RBA rate hike later this year,” Mr Oliver said.

“The set back to growth from the Omicron wave is looking modest with new cases already slowing.”

Supply chain issues and labour shortages could put further pressure on property prices.

LJ Hooker head of research Mathew Tiller took a more cautious approach.

“Despite rising inflation and falling unemployment, the dampening effect that the Omicron wave is having on the economy will see the RBA hold the cash rate steady until the economy shows steady and consistent growth,” Mr Tiller said.

REA executive manager economic research Cameron Kusher said he thought the RBA would “take a slow approach to hiking rates” and Resimac chief financial officer Jason Azzopardi said “Don’t expect both inflation and wage growth to remain sustainably in target ranges.”

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Originally published as Sydney house and unit prices forecast to grow as RBA cash rate holds for February