Will we see a slowing in house price growth in 2022?

Will we see a slowing in house price growth in 2022?

 

– Weekly Real Estate Update with Leigh Martinuzzi

 

This week the RBA met at its monthly board meeting and decided to maintain the current cash rate at 0.10%. With the March quarter consumer price index showing an inflation rate of just 1.1% and the RBA’s focus on restoring inflation to its target range of 2-3% we are unlikely to see any rate rise for some time.

 

Will we see a slowing in house price growth in 2022?

 

Well, early signs are suggesting that, yes, we will see the heat we’ve experienced in the first quarter of 2021 across the nations slow. This year so far, we’ve seen rapid property value increases with March alone being noted as the biggest gain we’ve seen in 32 years.

 

What does a market slow-down entail?

 

In brief, few factors give rise to early assumptions that in 2022 we may see property price growth slow. Important to note, that this doesn’t mean a market crash necessarily. What will bring the market to a steadier growth will be the effects of supply and demand.

 

Firstly, since COVID, international immigration came to a halt which previously bought about 200,000 new residents into Australia each year. It looks unlikely that this will change in 2021. And while we would mostly all agree we don’t need more buyer demand right now in Australia, the current Consumer Sentiment in Australia is changing and down 20% from its November high. A knock-on effect from rising property prices and fewer government incentives being given out.

 

At the same time, more sellers will return to the market after many decided that the COVID pandemic in 2020 was not an ideal time to move. Many sellers are also using this market as an opportunity to cash in on never-before-seen property prices.

 

On top of this, there is also a huge glut of building approvals in Australia that while now we can’t keep up with this will quickly change. According to a report by Michael Yardney, he says “we are likely to see over 180k dwelling completions this year while ‘underlying demand’ over 2020-22 tracking around 80k a year at best.”

 

Without international immigration to absorb some of this fat we may see as we’ve seen in the capital city rental market the supply outweigh demand. Current vacancy rates in Melbourne sitting at an all-time high of 6.5%.

 

So in a nutshell, more property availability over the next 12-24 months and a slowing level of buyer interest will most likely take some of the air out of this massive bubble.

 

This market will not last forever!!

 

Again, if there is anything I can help you with now, or in the future please let me know.

 

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