Adelaide, Brisbane, Hobart and Canberra could produce between 30 and 45 per cent capital growth for detached houses in the next two years, according to a leading property market analyst.
Propertyology Head of Research Simon Pressley tipped Brisbane and Hobart to achieve more than 20 per cent capital growth this year alone, while Adelaide and Canberra will be in the high teens and Perth about 10 per cent.
He said an unprecedented number of people looking to move, record levels of household equity and cash reserves, and record low volumes of properties for sale and rent made for a “tight real estate pressure valve”.
“The combined sum of the many factors that influence property prices points towards a continuation of very strong growth in asset values for quite some time yet,” Mr Pressley said.
In the Propertyology 2022 Property Market Outlet Report, the analyst noted that in November, Australia’s big four banks released their property market forecasts for the next two years, with capital city predictions ranging from single-digit price drops to 8 per cent price gains.
“Not for the first time, Propertyology’s analysis of underlying fundamentals gives a completely different outlook,” Mr Pressley said.
“Australia is just two years into a new and exciting era, which will produce the highest rates of home upgrades and relocations in human history.”
Mr Pressley said Australia’s economy is expected to crank up another notch this year.
“For the first time in decades, Australia is very close to being at full employment,” he said.
“Borders are re-opening, the number of jobs currently advertised is through the roof, and there is insufficient skilled labour to fill positions.
“We are on a trajectory for the highest rates of wage growth in 15 years, and Australia has just started its biggest ever infrastructure boom with 430 projects, worth $218 billion, due to be completed by 2025. Businesses are forecast to invest $200 billion in 2022.”
Mr Pressley is undeterred by whether interest rates rise or not, with many borrowers miles ahead in mortgage payments and overseas migration due to recommence at a time when housing supply is tight.
He said Propertyology research showed that 233,716 dwellings were listed for sale in Australia at the end of November 2021, the lowest in 11 years.
“The last time that Australian resale supply was at this level, our population was 3.5 million less, and the nation’s total dwelling stock was 1.8 million less,” he said.
“For as long as there are so few properties listed for sale, upward pressure on asset values is likely to remain intense.”
After 15 years of suppressed real estate activity, Brisbane will be Australia’s best-performing capital city in 2022.
“The economy of Australia’s third-largest city is still not as strong as many other locations, and commentary about internal migration and infrastructure investment is grossly exaggerated,” Mr Pressley said.
“But the overall conditions are such that we anticipate growth of 25 to 30 per cent – the strongest Brisbane will have seen since 2003.”
The Apple Isle capital has been Australia’s best-performing property market across the past seven years and is tipped to record about 20 per cent capital growth this year.
“Tasmania has become home to the most precious real estate in the country,” Mr Pressley said.
“Hobart currently has 70 per cent less resale supply than five years ago and only 97 dwellings advertised for rent.”
In Adelaide, annual house sales volumes passed 19,000 for the first time since 2002, which was a 20 per cent growth year.
Propertyology expects a similar year in 2022.
About 15 per cent price growth is expected for detached houses in the national capital this year.
Last year was Perth’s best since 2006, even though the median house price has only just returned to what it was six years ago.
Double-digit growth is possible in the Western Australia capital in 2022. Still, Propertyology warns, “any investment in Perth real estate will always be a gamble on Chinese demand for WA commodities”.
The report said with buyer and seller activity curtailed through Covid restrictions last year, it is hard to read the market in Sydney accurately.
“There is no doubt that a few underlying fundamentals are unfavourable,” the report said.
“One must have concerns about Sydney’s economy, heavily impacted by business exposures and lockdowns.
“According to ABS data, Greater Sydney had 4.7 per cent less jobs in October 2021 than two years earlier.
“An estimated 50,000 people (net) had already relocated away from Sydney during the first 18 months of Covid, plus housing supply volumes are trending up.”
Investor and first-home buyer activity are rising, and the outlook for the Darwin economy is improving.
Ravaged by extended lockdowns, the report said the fact Melbourne recorded any price growth in the past 12 months was testament to its position as a great global city.
But it warned the second half of 2022 and 2023 could expose cracks in its economic fundamentals.
“Thousands of businesses have already closed, Melbourne had 125,000 less jobs in October 2021 than it did two years earlier, and tens of thousands of people have already left town,” the report said.
“State Government debt is now three times higher than pre-pandemic levels.
“Like water, oil and flour, this is not a good mix.”
Mr Pressley said regional Australia would continue to be the biggest beneficiary of this new era of lifestyle movement.
He said a long list of regional cities had stronger local economies than capital cities, housing supply was tighter, and high rates of internal migration would drive significantly stronger property market performance than capital cities.
“During the first 12 months of COVID-19, the population of regional Australia increased by 51,000 whereas the eight capital cities produced a combined 17,000 decline,” he said.