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What You Can Expect from the Sydney Housing Market in 2022

What You Can Expect from the Sydney Housing Market in 2022

Jan 18, 2022 | Property Market

It’s no secret that the last few years have been a bit of a rollercoaster.

Housing market booms, interest rates at an all-time low, pandemic induced lockdowns, protests, bushfires, floods, stock market crashes, housing booms – you name it, it feels like we’ve experienced it.

But what can you expect from the housing market in 2022? With prices continuing to climb, many are asking what will happen next. Can we expect an epic fall? Or will prices continue to soar?

Let’s have a look at what’s happened recently and what that means for the new year.

High demand = high property prices

Throughout 2020 and 2021, the property market has been a seller’s market, with buyers battling it out to secure properties.

At the end of 2021, homes were selling across the country with minimal negotiation and homes were selling an average of 23 days early. Auction clearance rates held strong at 70-80% across the major auction markets.

With competition at an all-time high, real estate agents were seeing offers coming in from buyers on the day of listing – often well above the list price in a desperate attempt to secure a property.

On auction day, buyers frantically bid well above the reserve to secure their “dream” property in a seller’s market where the right property was hard to come by.

With demand so high, prices just didn’t seem to stop rising – from the “starter” unit to modest family homes right through to multi-million dollar estates.

Could the property tables be turning?

But all hope is not lost. With December’s housing values increasing by only 1%, economists and property experts are speculating that 2022 could be a buyer’s market.

With a surge in property listings, the pressure is off for buyers whilst vendors cut prices to secure a sale.

What’s causing the property listing surge in Sydney?

In 2020 and 2021 we saw the temporary suspension of open houses and public auctions as states put “lockdown’ restrictions in place. With Omicron now in the picture, many experts are speculating that the potential threat of future lockdowns has convinced vendors to act quickly.

In addition to this, the continuation of the pandemic has forced the hand of many vendors, selling their properties to recoup lost income or to purchase a home that suits their new lifestyle.

What are Australian home buyers doing?

For many buyers, the last two years have been a waiting game. Waiting for the right property. Waiting for the right price

When speaking with local agents as well as our clients, we’re finding that buyers are now “biting the bullet” and getting serious about purchasing after missing out on properties, struggling to find the right property or waiting to see where the market would move.

What about housing affordability and deposits?

When the property market exploded, housing affordability tanked.

For young Australians, the dream of owning a home became harder to achieve with rising prices raising the barrier of entry for young people looking to secure their first home. It’s expected that the results of the most recent census will show that the homeownership rate is at an all-time low.

But it’s not just the property price that’s the problem – it’s the deposit. For many buyers, the home ownership dream is thrown aside because saving for a home deposit seems out of reach.

Luckily, there are options for young Australians looking to purchase their first home. From government grants to incentives from lenders, we’re working with first home buyers to secure their first home (or their tenth!) every day.

But what about interest rates?

With interest rates the lowest they have ever been, it seems everyone wants to know when they will rise – and every expert has their own opinion.

The truth is, even if interested rates rise earlier than expected, it will likely be a gradual process. This gradual rise will continue to support housing demand as the cost of debt is likely to remain well below long-term averages.

Looking to buy or sell property in 2022?

Whether you’re looking to purchase your first property, downsize your home and your mortgage or looking to refinance your loan to avoid paying too much in interest – we’re here to help.

Our team has the experience and skills to help you reach your financial goals in 2022. Get in touch with us today at [email protected]

Housing affordability – how income to price ratios have changed

Housing affordability – how income to price ratios have changed

Apr 6, 2017 | Property Market

Over the past decade, there is no doubt there has been a property boom across the country, particularly in Sydney and Melbourne. This boom has spawned many heated conversations about the affordability of housing and whether it’s becoming more and more difficult for generations to enter the property market. Much of this debate is due to changes in income to price ratios.

Income to price ratios are measured by average house prices as a multiple of average household income. According to CoreLogic, Sydney is currently the most unaffordable with a ratio of 8.4-times, with Darwin the most affordable at 4.7-times.

The Australian property market is made up of micro-hubs, meaning that each of our capital cities has their own property market. As you can see in the above graph, no two capital cities have the same income to price ratio, making some areas more affordable than others. Sydney and Melbourne, the country’s largest capital cities, are the main drivers of price where there are continued population growth and more demand than supply.

CoreLogic’s recent Home Value Index states house prices in Sydney are up 18.4 percent on a year ago, making it the highest annual growth rate in 14 years. Head of Research, Tim Lawless says “The strong growth conditions across Sydney have provided a substantial wealth boost for homeowners, however, the flip side is that housing costs are becoming increasingly out of reach. This is especially true for price-sensitive segments of the market such as first-time buyers and low-income families,” (source: News.com.au, March 2, 2017)

If we compare these results to the income to price ratios since 1987, there is an obvious upward trend. Since 2013, in particular, there has been a significant increase, with the average income to price ratio increasing from 4.5 to 6.25.

(source: Clime, 23 February 2017)

So, what exactly is happening? Income to house price ratios have increased so significantly because the increase in housing prices in Australia has well and truly surpassed the increases in incomes in that same period. What that means is that houses are much more expensive, but people aren’t really earning all that much more. It’s no wonder first home buyers, in particular, are locked out of the market.

So what can we do about housing affordability? Lawless believes the property market is likely to moderate this year without the need for any major intervention from APRA or the Reserve Bank. Lawless predicts that affordability constraints and higher supply levels will slow investment demand, improving housing affordability.

If you’re looking to enter the property market and wish to understand how housing affordability in your capital city could affect you, give me a call today on 02 9095 6888 to discuss.