Australia’ housing prices have grown significantly over the past year, having the third-fastest rate to date. Adelaide, South Australia specifically ranked 14th in a global study that listed the least affordable cities in the world in terms of how much we earn vs purchasing a home. All across the country, people are wondering if property prices will ever drop. The most we can do is try to be more informed on what’s going on and how it all connects with the rise or fall of the housing market. This will give us a better insight into how everything is going so far – and what might come next.

What will property prices look like next year?

The last few years have shown us how hard it can be to forecast trends in the property market. But as the world is opening up more, we’re heading into a period of possibly starting to recover economically. This means that property values may still keep rising in 2022, just at a reduced rate from what we have seen.

However, not all suburbs will continue to grow so strongly. The pandemic has adversely affected low-income earners more than middle and high-income earners. Livability is also now a factor more relevant than ever. This leads to buyers willing to pay more for properties that have “pandemic appeal” and drives certain places to be more expensive than others.

Will people stick with renting?

Rental demand is predicted to continue to increase throughout 2022 as vacancy rates currently are very low. For a lot of people, renting is the only option available and with the vacancy rates being so low, rental demand will only continue to increase as fewer people can afford the rising purchase costs. With our international borders open, this will increase demand for rental housing further. Also, as international students and temporary visa holders are returning, this will drive up the pressure on apartment rentals that are close to universities and in the CBD.

Here’s what the banks say in 2022

Australia’s top 4 big banks have updated their property price forecasts at the end of 2021.
Here are their forecasts for 2022 and 2023:

1. NAB forecasts a 4.9% lift in property values for 2022 and a 4% fall in 2023.
2. ANZ expects a 6% price in 2022 and a 4% drop for the year after.
3. CBA estimates house prices to rise 7% this year and 10% next year.
4. Westpac expects an 8% rise in 2022 and a 5% fall in 2023.

This may be based on how Australians will be back to travelling and spending their money like in the pre-pandemic times. This will then possibly encourage people to upgrade or sell the homes that they were renovating on during lockdowns, which can be one of the factors that affects interest rates.

Will lending rules change?

APRA lifted the interest rate serviceability buffer for mortgages last October. Although some analysts expect them to intervene again next year regarding setting limits on loan-to-income ratios, which are tricky at the moment. They could possibly impose a limit on borrowers as well.

High-density living = affordable?

First home buyers have started the year with a record-high number of first home buyer loans with grants being a great help. However, that has decreased now month after month. New loans have fallen by 11% in a year but the amount borrowed is up 1% from the increasing prices.

The gap between housing and unit values has grown to 38% making high-density living more appealing to enter the market. Buyers are now more attracted to getting an apartment as house prices in the city and regional areas are out of their budget.

2022 and beyond?

Although the housing market has been steadily rising when you zoom out long term, predicting when the dip in the market will occur can be debated. Forecasts may give us a glimpse of what may happen but nothing is still set in stone and not all the experts agree.

Now there you go, I hope we’ve given you insight on how the property market is doing at the moment. Here at Lofty, we believe in full transparency and getting the best possible results for you. Our consultants also go into your next build project with your best interests in mind to create the best possible home that’s within budget. Get in touch with Lofty today.