While most property markets around Australia have performed strongly so
far this cycle (other than the inner city of high-rise apartment market),
moving forward the rate of property price growth will slow and there are
several reasons for this including:
- Affordability issues will constrain many
buyers. The impetus of low-interest rates allowing borrowers to pay more
has worked its way through the system now and with property values being
20- 30% higher than at the beginning of this cycle at a time when wages
growth has been moderate at best, and minimal in real terms for most
Australians, this means that the average home buyer won’t have more money
in their pocket to pay more for their home.
- The pent-up demand is waning–
While there are always people wanting to move house and many delayed their
plans over the last few years because of Covid, there are only so many
buyers and sellers out there, which will lead to fewer people looking to
buy in 2022.
- Our financial regulatorAPRAis intent on slowing
our markets using macroprudential controls.
Together these factors will lead to a two-tier property market – in
other words, not all locations will grow at the same rate moving forward.
I can see properties located in the inner and middle-ring suburbs,
particularly in gentrifying locations, significantly outperforming cheaper
properties in the outer suburbs.
While the outer suburban and more affordable end of the markets have
performed strongly so far, as I explained affordability is now becoming an
issue in these locations.
More than that, Covid19 has adversely affected low-income earners to a
greater extent than middle and high-income earners who are have recovered their
income back to pre-pandemic levels more quickly, while many have not been hit
at all.
And as we start to emerge from our Covid Cocoons there will be a flight
to quality properties and an increased emphasis on liveability.
As their priorities change, some buyers will be willing to pay a little
more for properties with "pandemic appeal” and a little more space and
security, but it won’t be just the property itself that will need to meet these
newly evolved needs – a "liveable” location will play a big part too.
Those who can afford it will pay a premium for the ability to work, live
and play within a 20-minute drive, bike ride or walk from home.
They will look for things such as shopping, business services,
education, community facilities, recreational and sporting resources, and some
jobs all within 20 minutes reach.
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Jason Gwerder
Wednesday, 8 December 2021
