Despite all the challenges and frustrations COVID-19 and lockdowns have thrown at Victorian’s, the Regional Victoria and Melbourne property markets have experienced a once in a generation boom in property prices. Over the past 12-months, we have seen Melbourne house prices rise by over 15.1%. However, the momentum in price growth is starting to show signs of easing. Should we be surprised? Should we be worried? Or is it a great time to buy? Let’s delve into what we can expect from the Regional Victoria and Melbourne property markets throughout 2022.
Continued price growth throughout 2022
Regional Victoria and Melbourne property prices are very likely to keep rising in 2022, however not everywhere and not to the same extend as they have been over the past 18+ months.
2022 is likely to be a positive year of strong economic growth, high business and consumer confidence, and where new jobs are created. According to www.domain.com.au, even the major banks agree that house prices are likely to rise in 2022, with a possible correction starting to occur towards the end of 2023.
ANZ expects Melbourne’s house prices to lift by 7% this year. CBA sees Melbourne property prices rising by 8%, while NAB forecasts growth of 5%. Finally, Westpac is more bullish, expecting dwelling values to rise 8% in 2022 – which ultimately is not great news for first-home buyers.
However, there are some risks to this further price growth. This includes unforeseen consequences from COVID-19, in particular the Omicron variant, rising interest rates, and the tightening of lending requirements and restrictions by the Australian Prudential Regulation Authority (APRA). In addition, as more high-quality property listings come onto the market, fewer buyers are attending inspections every week. In addition, the number of properties attracting double-digit registrations, sales contract enquiries and those exceeding reserve prices is diminishing. The strong appetite, and fear of missing out (FOMO), which buyers have had for the last 6+ months is essentially diminishing. Buyers now have choice and time – which is something they haven’t had in a long while.
However, affordability issues will constraint some buyers
Not only have property prices risen by more than 20% in the past 12-18 months, but borrowing capacity has been reduced for many as APRA tightened credit criteria and some banks are currently raising fixed interest rates too. Furthermore, according to CoreLogic data, the ratio of housing values to household incomes is also at a new record high in many regional areas.
It’s then no surprise that affordability will inevitably become an increasingly significant factor which cools the market, potentially resulting in a more balanced market correction. According to www.domain.com.au, this is likely to occur in late 2023.
However, attractive incentives are likely to continually motivate many buyers, including first-home buyers. According to www.realestate.com.au, the Victorian Government is backing an attractive offer for purchasers of new residential property before June 30, 2022: a 50% stamp duty concession, or 100% stamp duty concession if the property has been on the market for more than 12 months.
In fact, as the gap between housing and unit values grow, 2022 may also see high-density living become more appealing for buyers impacted by affordability. For many hopeful first home buyers, current property prices are unfortunately already out of budget. As affordability constraints start to weigh in, there could be additional demand pivoting into the unit sector within 2022 and 2023.
This may lead to a two-tier market
The silver-lining of COVID-19 is that the pandemic has allowed many Australians to rethink and reconsider their lifestyle and how they want to lead their lives. As we’ve seen over the past year, this has impacted which properties do well, and which do not – and as such, not all locations and not all property types will continue seeing price growth.
Properties located in the inner and middle-ring suburbs which emphasise liveability, particularly in gentrifying locations with low supply, will significantly outperform less desirable, outer suburb locations.
As family’s emerge from their COVID-19 “cocoons”, there will be a continued flight to quality properties as some buyers will be willing to pay a little more for properties with “pandemic appeal” which showcase a little more internal and external space and security.
A liveable location will also strongly appeal to these buyers (many of whom are family upgraders) – somewhere a buyer can work, live and play within a 20-minute drive, bike ride or walk from home. Quality amenities such as shopping, business services, education and childcare, community facilities, recreational and sporting resources will continue to be desirable.
It’s important to remember, if you’re looking to buy, you should not worry about whether the market is going to cool tomorrow. And if you are looking to sell, ensure you sell and then subsequently purchase in the “same market” cycle or timeframe.
Remember, housing and property is a long-term game and you should plan to hold your asset through at least one or two cycles (10-20 years). Don’t let short-term “expert predictions” or media speculation change your long-term course or outlook. To learn more about key property investment terms, see our article Key Property Investment Terms and Jargon explained.
Always seek advice from a trusted professional.
Purchasing and investing in real estate is exciting and when done well, can significantly transform your life. Your local One Agency specialist, lives and breathes real estate in your area and has insights into exactly what is happening in your community.
Now is a great time to get started on your property journey, or continue climbing the property ladder, as interest rates are at an all-time low. Our agency is also seeing high-quality family-oriented supply begin to come onto the market, and this is set to continue as we progress through summer.
To learn more about the benefits of real estate investing and what prices may do long-term, please contact us at One Agency. With One Agency being one of Mildura’s most trusted real estate agencies, we are well placed to provide you with our view of the current market based on our local experience. We’ll thoroughly guide you through the process and help you take advantage of this opportune time in the property market.