2021 was an unprecedented year with property prices across the country peaking at an all-time high. Many will be wondering, will these trends continue into 2022? In this article we will be reviewing why and what happened in 2021 to create such growth and will this golden period continue into 2022.
Why was there so much property growth in 2021?
Dr Nicola Powell, Domain’s chief head of Research and Economics, stated that 2021 had the perfect mix of factors to create the Australian property boom.
“Ultra-low home loan rates, government stimulus, rebounding economic conditions, and returning ex-pats which all contributed to the perfect combination of factors for extraordinary price growth and activity in 2021.”
In addition, she said, “2021 will be remembered as the year that radically defined the way Australians use – and prioritises – what they want in their properties”.
Arjun Paliwal, founder of InvestorKit, added “Australia experienced an unprecedented property boom in 2021 as households saved more cash”, thus creating increased demand in the market.
With such a perfect mix of variables, the property market saw the pendulum swing in favour of sellers, with the median house price rising to just over 1 million AUD. Whilst here in Singleton there was a significant jump with the medium house price rising from $404,000 in 2020 to $454,000 in 2021, a 12% increase.
Will property prices continue to increase in 2022?
According to property specialists, the answer is yes and no. Experts are suggesting that the pendulum will start to swing back in favour of buyers, with a return to a more sustainable balance. This prediction comes off the back of data gathered from various property websites that have seen a decline in user activity towards the end of last year. According to realestate.com weekly search volumes nationwide fell 6% in November.
As a result of the perceived lack of buyer demand, experts are saying that unlike 2021 the market will be driven by demand instead of supply.
Another significant factor to consider this year will be the prospect of interest rate hikes. Typically when interest rates have been low, it has encouraged first-time buyers to enter the market, as obtaining mortgages is more affordable. However, the inverse is true. Historically when interest rates have risen it has made obtaining finance more costly, thus discouraging many who were looking to enter the property market. Although there has been much speculation in the media about these inevitable hikes, the central bank has repeatedly insisted it won’t lift the rate until 2024, or 2023 at the earliest.
Will Covid still affect how people buy in 2022?
Although 2022 looks to see us move back to somewhat of a pre-covid normality, many of the trends which emerged during the pandemic look to be sticking around. For instance, virtual buying, which saw a massive surge since restrictions began, is set to continue. Arjun Paliwal stated, “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.” In addition to virtual buying, the lifestyle changes implemented during the pandemic are set to continue, thus shaking up how people look to buy. More and more Australians are reconsidering how they balance work life and home life, including working from home arrangements and even looking to bring forward retirement plans. All of these changes have led Aussies to ‘rethink their living situations and seek a better lifestyle sooner”. Such changes have seen a rise in demand for beachside properties and rural properties as people move away from the city.
All in all the property market is healthy and returning to a level of normality that makes it more accessible for first-time buyers to enter the market, which is good news for all Australians.