There will be a growing number of Australians feeling mortgage stress due to rising interest rates, while first-time homebuyers will still have big headaches.
First-time homebuyers are hoping for some relief from soaring Australian house prices, but they will still face huge hurdles to enter the market in 2022, while mortgage holders fear they will not. not be able to repay and even lose their house.
However, there may be some relief for home hunters in terms of the fierce competition that has defined the 2021 market.
Buying opportunities look promising for 2022, with valuations surpassing last year, indicating that a number of homeowners plan to list their properties for sale in the new year, according to Domain.
This means that the total number of houses for sale will be brought back to a “normal area”, he added.
Prices are not expected to rise at the same rate as in 2021, with the loan tightening reducing buyer debt and wage increases not keeping pace with last year’s price growth, Domain found.
However, he expects Australians to continue seeking coastal locations as the popularity of beaches continues to explode. For example, house prices in Somers in Victoria, Byron Bay in New South Wales and Sunshine Beach in Queensland have increased by 69%, 58% and 48% respectively over the past year.
Buyers will be encouraged to focus on affordable coastal areas ready for future growth in 2022.
Research and economics chief Dr Nicola Powell said investors will continue to be a growing market segment unless loan regulator APRA puts a damper on it.
“It remains a homeowners market in most major cities and in regional Australia,” she said. “Investors have benefited from higher rents and growth in equity, with prices expected to continue to rise, although at a slower pace than in 2021, investors will continue to do so.”
Areas such as the interior of Melbourne and the city and east of Sydney, which historically have a high level of out-migration and student populations, will be susceptible to a tight rental market once the border crosses borders. international organizations fully reopened, the report warned.
How much should the prices increase?
Leith van Onselen, chief economist of the MB Fund and MB Super, predicts that Australian property price growth will slow sharply in 2022, with nationwide values rising 7-9%.
While house prices in Sydney and Melbourne are approaching all-time highs compared to other capitals, prices in Brisbane are approaching all-time lows, he added.
This means that accommodation in Brisbane presents exceptional value compared to its bigger cousins on the east coast, he said.
But Sydney and Melbourne, which have long been the nation’s biggest real estate hubs, are on track to drop 3-4% if cash rates rise and regulations tighten, according to Louis Christopher, chief executive of SQM Research.
He also believes Brisbane is set to challenge the trend, with the Queensland capital set to grow by as much as 14% next year, he added.
Meanwhile, real estate investment company Wealthi says that as interest rates start to climb, there will be a shift in demand for homes priced from $ 700,000 to $ 800,000.
“We’ve seen crazy prices despite the lockdowns this year,” said co-founder Domenic Nesci. “But we’re starting to see signs that people may not want to buy a property over a million dollars. People will be looking for more value and affordability.
What the buyer’s agent expects
Fear of Running Out (FOMO) will be banned because people won’t buy the hype in 2022, according to buyer’s agent Michelle May, which means they won’t be rushing to make a decision either. .
“A further increase in supply will reduce the pool of buyers. As sellers look to capitalize on the huge growth over the past 18 months, more listings will mean more choice for buyers and a relatively slower tilt in further price increases, ”she noted.
“Buyers can be much more picky and not jump into the wrong property too quickly without doing due diligence. ”
But with the tightening of lending rules in November, Ms May believes it will affect first-time homebuyers the most, making the market even more inaccessible to them.
“The first home buyers who can still enter the market will have to look to apartments,” she said.
“Otherwise, they risk renting longer because the disparity between the price increases for apartments and houses has been significant. “
With the border opening to international arrivals in December, the return of student and skilled worker immigration will also see more apartments sold and rented in the city center, Ms. May predicted.
“The vacant apartments targeted in this market have been inactive during the pandemic and will now be reclaimed as we witness the return of international students,” she said.
“As we see the population increasing again, we will see more buzz around the apartment market, especially in college districts.
“Likewise, as we see the increase in the immigration of skilled labor, the general real estate choices are also apartments with easy access to transport, school and general amenities.
“Affordability certainly plays a factor in this, as well as a generally higher level of acceptance of apartment living among immigrants from overseas.”
With her eyes on a number of new Sydney hotspots, Ms May singled out Bexley, Belmore and Arncliffe, suburbs which she says have grown exponentially over the past year with growth of over 30% .
“One factor contributing to the change is that people are being driven out of the western interior because of the higher prices,” she added.
“Awesome young couples and families will be buying big in these new hot spots. These are ideal areas for starting homes due to their relatively good affordability. Another win-win is that with the upgrade of the metro line, the journey to the city will be approximately 20 minutes shorter. “
Western Sydney’s new airport is also good news from a buyers’ perspective, Ms. May added.
A trend that accelerated in 2021 – virtual shopping – will also increase due to expats, immigration, and sea and tree changers, Ms. May added.
“In 2020/21, we saw a big drop in auction results because people were really hesitant to buy online or virtually. Now that we have had the time to adjust to the concept and this new normal, we will see an increase in virtual shopping and online auctions and people will be more comfortable doing it, ”she said. .
What the banks predicted
This is the news every young Australian has been waiting for: a drop in house prices but not quite in 2022.
House prices are expected to fall in Australia in 2023, according to major banks.
This year, home values have increased by more than 20% and are expected to rise 6% for 2022, according to ANZ.
“If our forecasts materialize, housing will be 27% more expensive at the end of 2023 than at the end of 2019,” warned ANZ economist Adelaide Timbrell.
The National Australia Bank expects a 4.9% increase as the impact of low interest rates and income support during the pandemic begins to wear off, said Rachel Slade, director of the NAB group of personal banking services.
Westpac also forecast a slowdown, with house prices expected to rise 8% in 2022.
The Commonwealth Bank forecast a massive 10% drop in Australian house prices in 2023 after a surprising period of growth that left new buyers feeling left out of the market.
While house prices are expected to continue to rise until 2022, Gareth Aird, CBA Australia’s head of economics, believes that interest rates will help stabilize the market in a few years.
What Australians Worried About
A Canstar survey of more than 2,000 Australians found that many predicted increased mortgage stress in 2022, with residents of New South Wales and Western Australia most concerned about the issue.
While Canstar’s analysis shows that the average variable interest rate for homeowners has fallen 0.25% from a year ago, fixed interest rates tend to increase overall, particularly for longer term loans.
Its database shows 62 variable rates below 2%, up from 14 in December 2020, while the number of fixed-rate loans below 2% is currently 79, up from 119 a year ago.
Respondents also predicted a slowdown in house price growth, he said.
While the national home value rose for the 14th consecutive month in November 2021 according to CoreLogic, the growth rate has been the slowest since January.
Canstar Group Chief Financial Officer Steve Mickenbecker said Australians were getting nervous about ownership in 2022, with 47% of survey respondents anticipating slower price increases, rising interest rates, higher levels of mortgage stress and foreclosures.
But he said there were signs of slowing down.
“In the latest data released, figures from the Australian Bureau of Statistics show that mortgage lending in October fell for homebuyers, leaving only investors to pick up speed and the pace of house price growth to slow again. in November, “he noted.
“With 23% of Australians expecting an increase in foreclosures and mortgage stress, even before we saw the cash rate rise, confidence in our ability to absorb a sustained increase in mortgage interest rates is limited. “
Despite a spot rate that has not budged for a year, interest rates move in both directions, down for variable rates and up for fixed rates.
This is a sure sign that the market expects the Reserve Bank to rise in the next 12 months or so, he added.
“Fixed interest rate deals disappear from the market for terms longer than 12 months, with all competitive action taking place on variable rates that banks can increase at any time,” he said.