Herron Todd White (HTW) has released its real estate predictions for the year ahead as the monthly property clock continues to show market stability.
The February property clock for houses shows all areas of Australia are in positive territory, with the majority still enjoying a rising market, and fuel still left in the price growth tank.
Only Bathurst, Burnie/ Devonport, Canberra, Dubbo and Launceston are positioned at the peak of HTW’s property clock, while Albury, Central Coast, Geelong, Illawarra, Mildura, Newcastle, South West WA, the Southern Highlands, and Wodonga are approaching the peak, and most remaining regions are rising.
Only Alice Springs continues to be positioned at the start of recovery.
The unit market looks similar, but with the standout difference of Canberra, which HTW has again noted is in decline.
There are also a lot more regions in the unit sector which are just at the start of recovery.
In addition to their monthly property clock, HTW has also taken the opportunity to outline its predictions for the market in the months ahead.
In his report introduction, HTW Chief Executive Officer Garry Brinkworth said there were multiple drivers at play, making future trends difficult to predict.
However, he said after strong price gains across the country during 2021, the two major markets of Sydney and Melbourne were now showing signs of a slowdown.
“Around 60 per cent of all national property transactions take place in these two cities, so their performance directly affects Australia’s overall real estate picture,” he said.
“The big question that remains is, ‘Are property prices likely to correct in 2022?’.”
Mr Brinkworth continued the answer to this question would be influenced by factors including interest rates, housing supply, unemployment, and the reopening of international borders.
“Rising inflation and comments from the RBA Governor all point to a series of interest rate increases in the latter half of 2022 and into 2023,” Mr Brinkworth said.
“That said, financial institutions have been applying adequate buffers to loan applications for some years now, so a few percentage point increases, at least in the short term, can be weathered by most borrowers.
“We also know that new house construction prices are under significant cost pressures potentially establishing a higher floor price for new stock.”
Noting the unemployment rate was currently at a low 4.2 per cent, with predictions it could sink to 4 per cent later this year, Mr Brinkworth said the labour market remained tight and would likely stay that way for some time.
“High demand for labour will likely drive wage growth, which in turn supports the ability for workers to service loans, even when interest rates rise,” he said.
“The counter to this is the very recent announcement of our international borders reopening and whether overseas workers will help fill the current employment void.
“Depending on their numbers, demand for housing could rise and therefore put upward pressure on prices.”
Mr Brinkworth said while unforeseen external factors could affect the economy at any time, there was good evidence to suggest markets would continue to stabilise in the short term at least.
“It must be remembered, however, that individual locations will operate at differing speeds.”
HTW’s National Director of Residential, Ben Esau agreed, noting early signs for 2022 suggested a separation of performance between markets based on more local dynamics and price growth at more normal levels.
Factors influencing which areas would enjoy further price growth and those which would stabilise included regional and overseas migration.
Mr Esau said historically, overseas migrants concentrated on major capital cities and Melbourne in particular.
“What is not known is whether new migration patterns will follow this capital-city trend or add further pressure to regional markets,” he stated.
Meanwhile, he said a key question remained about the recent population shift to regional areas and whether it would continue, taper or reverse.
“One such consideration for those who have already moved (or are considering doing so) is the historical need for workers to live in and near large cities to take advantage of the varied employment options and build important relationships that foster growth opportunities and career progression,” he explained.
“Will this important aspect of many careers be possible when living remotely or will it drive some back from the regions?”