My predictions for 2022

There has been much hype in the media about surging residential house prices in Australia over the last 12 months. Affordability being reduced , first home buyers unable to gain a foothold and comparisons between the 2021 cycle and other periods of growth such as 1989/90, 2010 and 2017. I have been studying these property cycles for the last 30 years. As Chairman of WBP Group one of Australias largest independently owned property valuation companies and as a leading Property Buyers Agent I have a particular view on this cycle and where it could go next.
Lets look at some of the cold hard facts. The 2021 upward growth cycle is young having run for 4-5 quarters. Historically, upswings can be larger albeit at lower rates of growth.

What I have observed from the ABS annual property price statistics is the following :-
Melbourne Property price growth has outperformed Sydney between 2017 and 2021.
Sydney Melbourne

Sydney Melbourne
2017 +3.8% +10.2%
2018 – 7.8% – 6.4%
2019 +3.7% +4.1%
2020 +3.7% +2.9%
2021 +25.4% +19.5%
5 Yr +28.80% +30.30%
5.76% p.a 6.06% p.a
If we look at the weighted prime price average of the 8 capital cities we see the following results:-
2017 +5% (Last Peak)
2018 -5.1% (Federal Election)
2019 +2.5% (Post election recovery)
2020 +3.6% (Covid year)
2021 +21.7% (Record growth year)
5 Yr +27.7%
5.54% p.a
Australian house prices and particularly Sydney and Melbourne are only compounding between 5% – 6% p.a. This is below the long term growth average for these cities. Property is a long game and therefore any meaningful analysis of property growth statistics has to be over a longer term horizon. Whilst 2021 was an outlier year it was purely a catch up year and over the last 5 years property in the main is performing as I would expect. I am therefore not nervous of the current growth cycle and whilst I do not expect Sydney and Melbourne to grow at 20% plus in 2022 , it will be a positive growth year for property. In 2022 I expect property prices to rise between 8-12% in Melbourne and Sydney as the fundamentals remain strong.

Key Drivers and Risk

  • Supply is the root cause. We have not overbuilt. This is not a speculative investment boom.
  • Unemployment is expected to remain low
  • Interest rates are expected to remain low by historical standard. This needs to be watched carefully as I would not be surprised to see the banks raise interest rates this year ahead of the RBA
  • The opening of international borders, influx of skilled migrants and return of backpackers and overseas students will underpin future property price growth
  • Return of large numbers of Expat Australians in last quarter of 2021 will be searching for property in the first half of 2022
  • Federal and State elections (In Vic ) will cool the heals of property in 2022

Are You Thinking of Buying or Selling In 2022? Contact Greville Pabst today on 03 9589 3886.