January 2022
This is a tough question, and I don’t know whether anyone can predict with any certainty what the landscape for prices going forward will look like. I do know one thing for sure, and that is we will not see what we saw through 2021.
We recorded the fastest price growth in 32 years on average across Australia. Some areas and regions exceeded the 21% average and other areas saw much smaller gains. These huge increases have come from a high base to begin with in global terms. Basically, these gains will probably not be repeated in most homeowners’ lifetimes.
There are so many moving parts to all facets of the economy generally, and at the moment not much of it is good that I can see. I do not want to sound pessimistic, but I am just processing the facts that are in front of us now and in real-time. I know some forecasters and banks are predicting medium gains of around 4%-6% this year, with price corrections or falls in 2023 of 10%. This, to me, seems very contradictory. It is basically saying that over the next 2 years we will have negative 5%. Personally, I feel that negative 5% over the next 2 years could be optimistic.
Where are all the buyers going to come from to create the demand and maintain the price levels we are at now? Especially as we have had 450,000 fewer immigrants coming to make Australia their new home over the last 2 years due to border closures. Australia will not double the intake of immigrants when borders reopen to fill the vacuum of the last 2 years because that would be 900,000 people in 2 years.
We also have falling natural birth rates, and our universities have very few foreign students. On top of that, our 2 biggest cities, Melbourne and Sydney have had witnessed a huge exodus to regional areas and especially to South East Queensland. Add to that first home buyers especially in Sydney cannot even get on the first rung of the ladder. Where can the demand possibly come from? So, getting back to the often-asked question, where are prices headed for in 2022?
The supply/demand graph has changed. With more stock coming to market, and fewer buyers prepared to pay extortionate prices, surely the pendulum must swing against prices and in favour of the buyers. Common sense might suggest we have already peaked and going forward we may experience price corrections. I know this comment goes against the current 'pump the tyres up' narrative. I honestly can’t see how the party can continue. (I have been wrong before).
Blaise Griffin
blaise@griffinpropertyagents.com