As we approach the end of the year and everyone starts to wind down, it’s a great opportunity to begin formulating plans for the coming 12-months. Having a strategy is essential – if you fail to plan, you are planning to fail.
To help you deliberate on your personal investing roadmap for 2022, I’ve laid out what I expect to happen with property markets in the coming year.
Movement drives markets
2021 has seen a strong desire for migration at all levels, whether it be interstate, intrastate, across town or around the corner. It seems everyone is on the move to escape pandemic fallout, or because they’d had time for a little ‘self-assessment’ and decided it was a good time to do something.
And why not! It’s not like you need to live in a particular location for work anymore.
- Overseas immigration
This has obviously been a struggle since our county’s borders slammed shut in early 2020. Of course, it has been progressively easier for people to come to Australia. The ramp-up in returning ex-pats over the past few months has been particularly striking. I believe this flood of new and returning Aussies will only grow stronger in 2022.
A lot of people decided to make the shift in 2021 seeking more space, greater lifestyle benefits and – in many cases – more affordable real estate. Southeast Queensland and Northern NSW have seen the bulk of new settlements and all indicators are this will continue in 2022.
Of course, you don’t have to cross state borders to establish a totally new life. We are a big, broad country with a diversity of lifestyles on offer. As such, many people chose to flee the city and head to the regions within their own states and territories. Regional centres offer all the appeal of lifestyle, with ease of remote working while still allowing you to travel to your major capital without needing to quarantine. In short, intrastate migration was like travelling interstate – without the messy pandemic logistics. Regional centres saw extraordinary capital growth during this period, and that momentum will continue into the early part of 2022 at the very least.
- Within the LGA
Probably the key move here was people seeking to upsize from pokey inner-city accommodation to more spacious options a bit further afield, but still within their own city. You get far more bang for the buck by heading to the fringe suburbs. There’s plenty of space for kids, and less density reduces the spread of the virus. Upsizers dominated this shift in 2021, and it will likely remain a feature of the market in 2022.
Purchasers who remained in or near their home suburb mostly chose to upsize either by buying and shifting into their next home or by renovating their existing property. Some even demolished and started from scratch. Of course, there’s been a sizable increase in demand for labour and materials, which meant getting a builder in the first place has become costly. Also, good luck getting a build finished within a reasonable timeframe. I expect demand for quality builders and materials will continue into the early part of 2022. Owners may soon grow tired of these construction struggles and look for alternatives, which will fuel more demand for completed homes in the market.
The beginning of 2022
There’s no denying that anyone who held onto their assets throughout 2020 and 2021 is enjoyed a huge uptick in values. I believe we’ve reached a point where many will now look to sell up and cash in.
This will result in a general uptick in listings and supply. Although demand remains strong, expect to see prices soften a little during the earliest part of 2022 at least.
That said, demand for rentals remains high. Low vacancy rates and rising rents are perfect for attracting investors back as a market force. They may even overtake the surge of first home buyers we saw in mid-2021. If you’re purchasing within this price point and marketplace, make sure you have your strategy and resources lined up so you can make quick buying decisions. Otherwise, you’ll miss out on opportunities.
I also think the Christmas season will see what I call “relocation tourism”. People are seriously considering moving for lifestyle, and the holidays provide a chance to check out new locations. I believe the destinations to benefit from this will be Ballina through to Noosa, and all along the New South Wales and Queensland coastlines.
I have no doubt that a heap of the steam will have come out of the hot market by the middle of 2022 as a response to rising supply.
Don’t get me wrong – value growth will continue, but it will be at a far more manageable rate – not the huge double-digit gains we experienced over the past 12-months.
The reasons for this will be:
- An uptick in land supply. This is the lag effect, where current demand fuels an urgency for more development. By the time these blocks currently under development come to market, demand won’t be so frenetic. It’s the same sort of situation we saw with units between 2016 to 2018. Also, Homebuilder Grant builds will be coming to completion mid next year, so as these owners move into their new homes, there will be plenty of older properties listed for sale or rent, adding to the housing stock.
- As supply increases, buyers will have more choice and less time pressure. Demand will still be good for quality and well-priced property, but this will be more mature and manageable than the frenzied action of 2021.
- Also, expect to see some investors cash out of assets by mid-year. They’ve made good capital gains, rental markets will have started to lose a little momentum, and the prospect of further gains will be reduced. These owners will be looking to take their profits and move on.
But will prices drop next year?
This is perhaps the number one question we get asked as property professionals – will prices drop and, if so, then when?
The short answer is pricing won’t drop – well, in good locations at least.
I think supply will increase and demand decrease, but the outcome will be a slower rate of price growth. Vendors will need to be more realistic about the offers they accept as buyers will have FOMO fatigue and more choice.
But of course, this will be location-specific, and secondary areas will be the first to feel any downturn. Conversely, quality locations and properties will prove resilient.
For example, as international borders open again and immigration resumes, we will see populations surge in cities where overseas arrivals have established social and family networks. By sheer weight of numbers, Melbourne, Sydney and Perth will be the largest recipients.
Also, the government needs more workers to create tax revenue to pay off their COVID-19 debts, so they will attract as many six-figure salaries, tertiary-educated workers from overseas as possible.
Finally, many of our COVID adaptions are here to stay.
Zoom rooms, sea change, tree change, regional economic growth from residents working from home will be long term trends.
The world has changed, so we best get used to it.
We at ASPIRE hope you all have a wonderful Christmas and joyous New Year. We look forward to being part of your prosperous 2022.
Stay safe and travel well everybody.
Always review any property location research and investment analysis data, with a professional, QPIA (PIPA Member) qualified & accredited ASPIRE Property Advisor Network Advisor. Never rely on glossy sales brochures or property marketing information, ensuring a property is right for your strategy. Property Investing is about BUYING a property that matches your goals and aligns with your investment strategy, never be SOLD an investment, know your numbers!
Visit www.aspirenetwork.com.au or call our office to be connected with an accredited and independent Property Investment Advisor on 1300 710 933.