This year will be far more diverse for the housing market, says Tim Lawless. Image – Canva.
  • 22.1% house price was recorded last year nationally
  • Given the upcoming federal election, housing affordability is likely to be as major issue
  • The wildcard will remain the pandemic, says CoreLogic's Tim Lawless

The past two years have been unprecedented for the property market.

From an initial sharp decline in house prices upon the pandemic beginning in 2020, prices have since boomed, with 22.1% growth recorded nationally last year, according to CoreLogic.

In spite of lower-than-average listings and low overseas migration, the number of home sales reached a new record high last year.

Tim Lawless of CoreLogic said this domestic demand was fuelled by a mix of record low mortgage rates and pent-up demand from previous years.

“As international borders re-open, rental demand is likely to be the main beneficiary, rather than home buying demand, especially across the inner city rental precincts popular with students and visitors,” added Mr Lawless.

Tim Lawless, CoreLogic Research Director. Image – CoreLogic

While house price growth last year was the fastest since the late 1980s, incomes barely moved.

This has resulted in higher barriers to entry – not just raising deposits, but transactional costs such as stamp duty.

Given a federal election will be held this year, it is highly likely home ownership will be among the hot issues during the campaign.

The tides have started to turn however, as new listings increased in the later part of the year,” added Mr Lawless.

“The average time on market is beginning to increase, while auction clearance rates have trended down.

“The combined capital cities clearance rate hit a record high 83.2% for the week ending October 3rd as COVID restrictions eased across the major capitals, but averaged just 63.8% through December.”

So, what’s in store for 2022?

Unsurprisingly, Mr Lawless said the largest wildcard will remain the pandemic, especially given the Omicron and potential future strains.

This could work either way for homebuyers, he noted.

“A return to restrictive policies, especially those that prohibit movements or home inspections, would result in a new phase of temporary disruption to transaction activity.

“However, such a scenario may also prolong expansive monetary policy and low-interest rates, which helped sustain housing demand through 2021. “

The other downside risks for housing could include tighter credit policies or a lift in interest rates. Though the Reserve Bank has previously implied it wouldn’t raise rates until 2024, many commentators have hinted this could occur as soon as this year.

Housing markets are likely to be sensitive towards any increase in the cost of debt, which would subsequently dampen housing activity.

A more diverse performance of the overall housing market is expected this year.

During the second half of last year, a growing disparity began to occur between the different capital city and regional markets.

For example, Sydney slowed down while Melbourne’s house values declined slightly in December. On the other hand, Adelaide, Brisbane and regional Queensland recorded significant growth.

“Trends in labour markets, demographic patterns, supply levels and affordability will all play a key role in how housing markets perform around the country,” added Mr Lawless.

Considering all of these potential headwinds, Mr Lawless said he ultimately expects house values to rise nationally in the short term.

“Even if interest rates rise earlier than expected, it is likely to be a gradual process. The cost of debt is likely to remain well below long term averages, continuing to support housing demand for an extended period of time.”

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