Property signs to watch out for in 2022
Property had a stellar year in 2021 with Melbourne values soaring 15.1% for the year; 22.1% nationwide.
But at the end of the year, some statistics showed a slowing, leaving commentators suggesting the dream run was over.
So, is it? We think that pessimism is misplaced with the market likely to record solid if somewhat unsexy growth in 2022.
But there are signs you should look for to see how the market is travelling.
Auction clearances.
It seems so straightforward - high clearance rates good, low clearances bad. In truth, it’s more complex than that.
Some pundits took high clearances as proof of a hyper boom even though the number of sales was low then reversed their opinion when properties listed for sale in November and December soared and clearances tumbled.
We will get a truer picture if we return to the more familiar pattern of 1,000 auctions per week in autumn.
If we see a sustained clearance rate of 65% plus, the market is solid. Over 80% and the market is in a boom, less than 55% tells us the market is in a rut.
Interest rates.
Similar to clearances, interest rates are often cited as the one factor that shifts property.
This isn’t true, but a significantly change in the cost of money has an impact. So, one or two interest rate rises this year won’t change this market’s trajectory, but four or five will.
Keep your eye on finance approvals as this will tell us whether buyers are lining up over the next six months.
Immigration
Melbourne’s nation leading rate of overseas settlement has been one - but only one - of the factors driving property prices over the last 15 years.
But with the immigration shutdown during Covid, property price growth was still terrific, largely because there is a lag between arrivals and demand for housing purchases of around two to three years.
With immigration likely to rebound in 2022, we expect the impact to be felt in Melbourne over 2022, but at a lesser rate than before 2019.
The economy.
A booming economy and a galloping property market are joined at the hip, while recessions and flat or falling real estate prices are closely correlated.
The economic picture looks a little mixed at the moment, but we expect solid if unremarkable economic growth this year.
Author; Miriam Sandkuhler
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