Property market was a rollercoaster in 2022

From a once-in-a-generation property boom to a clear downturn, Australia’s property market has been a rollercoaster in 2022.

According to the Domain End of Year Wrap, extraordinary price growth in 2021 switched to a stark contrast this year with house prices across the combined capital cities falling 4.9 per cent from the March 2022 peak.

This equates to a fall of about $53,000. 

However Domain Chief of Research and Economics Dr Nicola Powell said it was still important to note the price cycle remained 27 per cent up on the mid 2020 trough.

 “The past two years have been fascinating to watch in real estate,” Dr Powell said.

“After soaring price growth in 2021, it was inevitable that we would see an adjustment phase of the property cycle in 2022. 

“This is a reminder that homeowners or prospective buyers need to maintain an overall perspective. 

“History tells us that in the last 30 years the duration and steepness of an upswing are longer and greater than a downturn, supporting the idea that it’s not timing the market, it’s the time spent in the market that counts.”

Overall there were 354,500 house sales in 2022, followed by 119,500 unit sales and 102,200 scheduled auctions.

The most expensive sale of the year was an $80 million state record set for 29-31 St Georges Rd, Toorak, in Melbourne.

Adelaide has been a standout market performer with prices rising 46.9 per cent during the upswing. But the South Australian capital is yet to record any downturn.

Hobart prices rose the most at 52.2 per cent, but it has since chalked up a 3.3 per cent downturn.

It probably comes as no surprise that Sydney, which saw prices jump 40.2 per cent during the upswing, has recorded the largest house price downturn this year at 8.3 per cent.

The unit market showed resilience in the smaller capital with prices in Brisbane, Adelaide and Canberra reaching new peaks and across the combined capitals unit prices also held firmer than house prices.

This year was also a strong one for auctions, with Domain Chief Revenue Officer John Foong noting auction volumes were 19 per cent higher than the five-year average.

“It was the third-busiest year on record for Australia’s auction market with the time to sell a house being the quickest it’s been since 2003 and for units the quickest since 2005,” he said.

“Despite being in a downturn, house prices remain substantially higher than before the pandemic property boom. 

“It’s crucial to provide this perspective to potential sellers  to help uncover opportunities and contextualise where we are in the property cycle and what’s actually happening in your local market.”

Another major trend impacting the property market in 2022 was interest rates.

“With interest rates rising at the fastest rate since 1994 – the impact on Australia’s housing market has put pressure on consumers’ ability to service a loan,” Dr Powell said.

“Many borrowers and potential home buyers had never experienced rate hikes of this magnitude and, justifiably, it has had a jolting impact on sentiment. 

“For many, thousands of dollars have been added to the annual cost of a home loan since rates began to rise which is challenging for many consumers to absorb.”

Dr Powell said the rapid increase in interest rates since May had triggered a wave of refinancing as Australians on fixed-rate home loans started to revisit their finances. 

“We’ll see this continue into 2023 as more Australians see their fixed rate expire,” she said.

“Now that prospective buyers are used to the new interest rate environment, they will likely be forward planning buffers for further rate hikes and are more mindful of their lower borrowing capacity.”

The end of year wrap also revealed overseas buyers searched for property most in Melbourne, followed by Sydney and then Middle Harbour.

In NSW,  the most ‘in demand’ area was Birchgrove, while in Victoria it was Gisborne.

Source: Domain

In terms of ‘what’ features buyers were looking for, lifestyle additions were high on the wish list, with keywords such as ‘pool’, ‘waterfront’, ‘beach’ and ‘view’ among the most searched terms.

A home with a designated workspace or study remained popular, as did homes with a breath of fresh air such as a balcony or courtyard.

Source: Domain

2023 trends to watch 

1. Downturns will be shorter and less severe 

As we move to 2023, the report reminds buyers and sellers of the cyclical nature of the property market and that property should be viewed as a long-term investment. 

With interest rates rising and property prices falling, it can understandably make homeowners feel uncertain about their property journey. 

However, while property prices will continue to soften in 2023, it is unlikely they will erase all the growth seen during the pandemic boom. 

2. Multi-speed property markets will create opportunities for upgraders 

Domain expects that a multi-speed market will become more apparent in 2023 with some areas falling faster while others will be more resilient. 

Overall, entry-priced houses and units will hold firmer, particularly in the most expensive capital cities, Sydney and Melbourne. 

This will be driven by the affordability barriers of purchasing, first-home incentives and deteriorating borrowing capacity steering demand to more affordable options. 

This coupled with the houses at the premium price point seeing greater falls, will create opportunities for upgraders. 

3. Interest rates aren’t the only factor affecting housing prices 

The speed and scale that prices soften will depend on many factors, however, the depth of the downturn will be largely shaped by how high-interest rates go, and when and how quickly inflation eases. 

But interest rates are not the only factor influencing housing prices. 

Tax settings, banking regulation, population and income growth, and the responsiveness of new housing supply to growing demand all make an impact. 

“Initially, rate hikes were a huge shock to potential buyers in 2022 but now buyers have adjusted to this new norm and are more mindful of their lower borrowing capacity,” Dr Powell said.

“With the wave of fixed-rate expiry in 2023, we will start to see the true impact of interest rate increases on consumer spending as more Australians tighten their belts to cover the step up in repayments over the last seven months.” 

4. The return of international immigration will increase housing demand 

With the opening of international borders in early 2022, the country’s major capitals welcomed back many skilled immigrants and overseas students. 

As part of the budget, the Australian Government has increased its quota for the permanent Migration Program to address the skills shortage gap which will essentially be the biggest immigration drive ever for Australia. 

This influx of people arriving from overseas will add incredible demand to Australia’s housing market. 

Initially, this will place a further strain on the rental market but continued rising rents will also make purchasing more attractive for strategic investors. 

5. Buyers will be willing to pay for the right neighbourhood 

In 2022, Domain’s analysis of keyword searches showed that lifestyle additions and location were high on wish lists, such as ‘pool’, ‘waterfront’, ‘beach’ and ‘view.’ 

It’s anticipated this will continue as many buyers are still willing to pay a price premium for the right neighbourhood and their home’s liveability features. 

“The global pandemic created one of the greatest lifestyle shifts Australians have experienced,” Dr Powell said.

“It emphasised the importance of the home and its surrounding community, as well as the ability to work, live and play within a short distance of where we reside. 

“Heading into the new year, we expect Australians to have their desire for more space, added security, the balance of life, the right amenities, education, sports facilities and green space on the top of their wish lists.”

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Kylie Dulhunty

Kylie Dulhunty is the Editor at Elite Agent.

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