Riding the wave of a property market trend can create very lucrative investment conditions. Knowing when a market, region, suburb, or even street is going to boom can create significant returns for savvy investors–and knowing when a market or condition may decline can make or break the success of a portfolio, too.
The COVID-19 pandemic created colourful (and often very unpredictable) twists and turns within Australia’s property market. We saw growth trends where we didn’t expect them. And we saw challenging trends in finance, regulation, and other areas that created growing pains for plenty of investors.
Now that the pandemic is starting to wane, many investors are licking their wounds (or are punching the air celebrating their wins) and are turning their gaze to the future with questions such as:
- “Is this price boom going to continue?
- “Will South East Queensland continue to be the darling of Australia’s growing markets?”
- “Which areas are going to boom next?”
- “Will APRA tighten investor lending restrictions furthermore?”
- And more.
Thankfully, there are many smart minds focussing on these questions. In today’s article, I unpack a series of trends and insights from Eleanor Creagh, senior economist at REA Group.
I invite you to use this research and its insights to get a better understanding of the current market and what may be in store for us in the next twelve months or so.
Trend 1: More People Will Sell In 2022 (Which Means Less Competition)
Late 2021 and early 2022 saw a sharp increase in new properties for sale. Analysts attribute this to two things:
- The easing of COVID-19 restrictions whereby sellers felt more confident in the market, and
- Increasing home prices across the nation, creating more attractive reasons to sell.
This trend is expected to increase in 2022, as pandemic restrictions relax furthermore and prices continue to grow, leading to a reduction in the pressure created by market competition.
Trend 2: Price Growth Will Slow (Slightly)
2021 saw some pretty incredible growth in many regions across Australia. There were plenty of market forces causing this growth, including the “great internal migration” which saw record numbers of people leave Melbourne and Sydney for the Sunshine State.
However, the combination of high home prices and ultra-low lending interest rates will slow this high pace of growth. Additionally, the Australian Prudential Regulation Authority (APRA) made changes to finance rules towards the end of 2021 that will reduce the borrowing capacity for new buyers (therefore easing pressure on competition).
Trend 3: We’ll See More People Upgrading
Pandemic-related lockdowns and remote work arrangements have increased buyer desire for larger homes with more living space.
Coupled with the recent rise in house prices, many homeowners have a nice equity bump in their back pocket… enabling them to borrow more and upgrade to larger homes more easily.
This may increase pressure on our already stressed residential construction market… but exploring this phenomenon is for another day.
Trend 4: Units Will Increase In Popularity
The demand for inner-city rentals (in the form of units/apartments) is likely to increase as skilled migrant workers and international students return to our shores.
Additionally, the declining pandemic will likely see a migration away from rural areas and back into CBDs and major economic centres.
Additionally, the huge disparity between house and unit prices across the nation could see homebuyers turning toward units as a more affordable alternative.
Trend 5: Investor Activity Will Remain Strong
Data shows that the number of investors contacting real estate agents to discuss new listings was recently at a two-year high. This tells us that investors aren’t deterred by market uncertainty.
Additionally, the recent tightening of investor lending restrictions (again, thanks to APRA) means that, instead of being forced out of the market completely, some investors may be seeking cheaper properties.
As a result, we may see increased uptake in investor acquisition of units and apartments across the country, leading to increased demand for this stock type.
Trend 6: Southeast Queensland Property Will Continue To Be In Demand
Brisbane, Gold Coast, and Sunshine Coast and their surrounding areas will likely continue to boom, driven by two main factors:
- Strong internal migration from interstate, as I mentioned earlier, and
- Infrastructure spending, job creation, and transport updates leading up to the 2032 Olympic Games
The South East Queensland corridor will likely continue to be the jewel in Australia’s property crown for quite some time.
Trend 7: Regional Markets Will Grow In Popularity
Remote working, and working from home, will continue to remain popular as 2022 unfolds. This means that remote lifestyle locations are becoming more and more accessible for the workforce, and may lead to increased demand in popular regional areas.
We may see a shift away from main economic centres, Sydney particularly, as many people realise they can now grow their career and live comfortably by the coast.
However, data tells us that properties available for sale in regional areas are still fairly restricted, which means prices in these areas may slowly rise.
Trend 8: Interest Rates May Rise Mid-2022
Many analysts predict interest rates may start creeping upwards in the middle of the year, fuelled by inflation and other post-pandemic market forces.
Increased rates increase borrowing costs, which generally reduces the amount people can borrow and ultimately contributes to a reduction in price growth.
However, the Reserve Bank has indicated that this may not be the case, and will assess inflation and wage growth before making the call to increase interest rates.
Can We Help With Your Investment Property Strategy?
Analysing trends is great, but it’s not for everyone. If you’re looking for an expert team to help with your property investment journey, request a Free 30-Minute Finance Strategy Session during which you will…
- Gain greater clarity over where you want to be in terms of owning investment properties (and how to structure your loans to get there the fastest, safest way)
- Discover how to unlock the equity in your current properties, so you can build your portfolio – and your wealth – faster (and enjoy a better lifestyle now and in retirement)
- Discover clever, no-cost ways to save money on interest, fees, and charges — immediately
- Get an up-to-date picture of the lending landscape including rates, conditions, and how to structure loans for cashflow positive investors
- Learn about our process to find you a better loan that will save you thousands.
This no-obligation session will be held with one of our experienced mortgage brokers.
Please be assured this will not be a thinly disguised sales presentation. On the contrary, you’ll receive our best strategic advice, specific to your situation, so you too can accumulate multiple properties without sacrificing your current lifestyle and accelerate your progress towards wealth.
Please note, the numbers and assumptions listed in this article are for educational purposes only. Individuals should seek specific advice pertaining to their unique situation and the real estate market before making any decisions.
Trilogy Funding Two is a corporate credit representative (Representative Number 506131) of BLSSA Pty Ltd, ACN 117 651 760 (Australian Credit Licence 391237)