Pumping Melbourne property market to cool through 2022

The hot property market of 2021 is tipped to ease in 2022, with Victoria’s housing market conditions expected to swing back in buyers’ favour.

Property experts — including researchers, economists, a buyer’s advocate and the president of the state’s peak real estate body — say Melbourne’s Covid-ravaged inner-city unit sector is also set for a turnaround in 2022.

But they expect the upcoming federal election, further intervention by the banking regulator and much-speculated interest rate rises could stifle market momentum.

No. 20 Joyce St, Nunawading, sold for $1,488,500 in December.

The predictions come after Melbourne house and unit values fell for the first time in 14 months in December, slipping 0.1 per cent to a $795,108 median, according to property data firm CoreLogic.

A typical dwelling in the city still stacked on 15.1 per cent in 2021.

The big banks have predicted more moderate price rises for Melbourne homes in 2022, ranging from 5-8 per cent.

REA Group’s Cameron Kusher tipped a 4-7 per cent increase and Propertyology’s Simon Pressley, a 5 per cent gain – his most conservative capital city forecast.

Real estate researcher and SQM founder Louis Christopher expected prices would land between a 3 per cent fall and a 2 per cent increase by year’s end.

SQM managing director Louis Christopher.

Mr Christopher anticipated the Australian Prudential Regulation Authority would act further to cool the property market in 2022, after it raised the serviceability buffer for new bank customers last year.

“(Melbourne and Sydney) are most sensitive to even minor intervention by the banking regulator,” Mr Christopher said.

Propertyology’s Simon Pressley.

Mr Pressley said “the cracks in Melbourne’s real estate fundamentals” – including the Covid lockdown-driven closure of thousands of businesses, plummeting job availabilities, the exodus of tens of thousands of residents and ballooning state government debt – could come to a head in the second half of 2022.

“Like water, oil and flour, this is not a good mix,” he said.

REIV president Adam Docking.

Real Estate Institute of Victoria president Adam Docking said the federal election and any interest rate rises could trigger caution among market participants – but the former would be temporary, and he didn’t expect the latter to occur until “deep into the year” or 2023.

He forecast the state’s reopening to bring “more employment opportunities”, and the return of overseas migrants and students. The latter would help revive buyer and renter demand in the ailing inner-city apartment market.

“We’re seeing prices stabilise, … but there are no indications of a reduction in prices,” he said. “Sellers will have to be more realistic with their pricing because buyers will have more choice.”

Celebrity buyer’s advocate Frank Valentic.

Advantage Property Consultant director Frank Valentic agreed, noting: “Sellers will still be drinking a lot of champagne. But there will be more balance than we had in the seller’s market last year, with fewer buyers getting smashed out of the park.

“Buyers will have more opportunities.”

The buyer’s advocate expected well-located family houses and “units with land content”, like townhouses and villas, to be in highest demand and notch 5-10 per cent annual price gains.

Eliza Owen, of CoreLogic.

CoreLogic head of research Eliza Owen predicted the “downswing phase of the cycle” would kick in as 2022 progressed – but she said this didn’t “have to be a disaster” for those who bought at the market’s peak if they viewed their purchase as a long-term investment.

“A decline in property prices will lower the barrier to entry for potential first-home buyers, but … mortgage repayments may be higher by that stage,” she said.

Mr Kusher said slowing price gains should help those trying to buy their first property. But saving a deposit would continue to be a significant barrier amid weak wage growth.

“We’re not expecting interest rates to rise this year, but it’s still going to weigh on buyers’ minds,” he added.

Ray White’s Nerida Conisbee.

Ray White chief economist Nerida Conisbee said 2021 closed with a boost in listings, a reduction in average bidders per auction and a rise in the time homes spent on the market.

“Conditions are moving more on the buyer’s side,” she said.

“We’re also starting to see restrictions to finance, which APRA may ramp up this year, primarily because investor lending is moving up pretty quickly.”

source: rea.com.au