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- RBA Rates to Rise in August? – Nonsense
- Property values will continue rising in 2022
- 2022 – the year of rising rents
- We’re in for a 2-tier property market moving forward
- More property investors will return to the market in 2022
- A flight to Quality
- Our economy will continue improving
- APRA will be watching the market carefully
- Most property predictions will be wrong
- The bottom line
We experienced a wild ride in property in 2021, didn’t we?
No one could have predicted the astonishing property price rises we enjoyed across the country. 
So, what’s ahead for our housing markets in 2022?
Well, we’re only a short way into the year and already there are some wild predictions.
Just look at the news headlines and you’ll see both positive and negative forecasts appear in the same paper on the same day.
They vary from the Omicron variant of coronavirus causing our economy and property markets to crash, to a sharp decline in the national jobless rate will cause official interest rates to rise significantly sooner than the RBA planned to slow down a booming economy.
Watch this week’s Property Insiders chat with Australia’s leading housing economist Dr. Andrew Wilson to get his thoughts on the trends that will shape our property markets this year.
RBA Rates to Rise in August? – Nonsense
A sharp decline in the national jobless rate has predictably resulted in another wave of speculation suggesting the official interest rates may rise significantly sooner than the RBA’s current outlook.
According to the ABS, the national unemployment rate fell to 4.2% [seasonally adjusted] over December – the lowest rate is August 2008.
This low unemployment rate unsurprisingly fuelled predictions from the usual suspects of a surge in wages growth stroking higher inflation and resulting in the RBA interest rate increases this year.
Watch this week’s property inside a video is Dr. Andrew Wilson explains why the short-term outlook for the national labour market remains patchy, reflecting the self-imposed, voluntary lockdowns which are set to impact economic performance through January February, and perhaps beyond.
Reflecting current data, the latest RBA statements, and depressing covid outlook predictions, of official interest rate rises as soon as August is clearly non-sensical according to Dr. Wilson.
Property values will continue rising in 2022
While our property markets slowed down their extraordinary growth as the year ended, there is still significant momentum left and 2022 promises to be another good year, but the rate of acceleration in property prices will slow.
While the interplay of many factors affects property values, the main drivers of property price growth are consumer confidence, low-interest rates, the availability of credit, economic growth, and a favourable supply and demand ratio.
As always, there are multiple real estate markets around Australia, but in general property values should increase throughout 2022, but at a slower rate of growth than 2021.
If history repeats itself, the Federal election which will be held in May will stall the property markets from the time it is announced.
And then life will get back to normal whatever the eventual election result will be.
2022 – the year of rising rents
Rents should also keep increasing in 2022 as vacancy rates tighten as there is currently a desperate shortage of good rental accommodation around Australia.
Adding to this, when we see our international borders open again and immigration is allowed to resume, we will see a surge in population that will put a strain on our housing markets.
We know the government is keen to attract skilled workers and students, so by sheer weight of numbers, Melbourne and Sydney will be the largest recipients of this population boom.
We’re in for a 2-tier property market moving forward
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 regulator APRA is 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 more inner and middle-ring suburbs, particularly in the more affluent suburbs and 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.
More property investors will return to the market in 2022
So far this property cycle has been driven by owner-occupiers and first home buyers, but now more and more investors are getting in the market.
Of course, this always happens after a period of strong housing price growth when a whole new generation of investors learns how well others have done by owning property.
They keep reading about the extraordinary price growth that those who are in property have enjoyed over the last year and that rents are rising as we are experiencing a shortage of rental accommodation.
However, if history repeats itself, and it most likely will, many of these investors will sell up over the next few years as they realise that property investment may be simple, but it’s not easy.
A flight to Quality
During the last few years, FOMO (fear of missing out) led inexperienced investors and homebuyers to purchase almost any property that their budget would allow, and they were fortunate as a rising tide lifted all ships.
But as the market matures, we will see a flight to quality with well-located A-class homes and investment-grade properties still selling well, but secondary properties having trouble finding buyers.
Our economy will continue improving
With the prolonged lockdowns in Australia’s two largest cities keeping people indoors and spending less, households have squirreled away an estimated $200 billion this year. 
As life returns to normal much of this will be spent over the next few years in an economy-boosting wave of consumption.
Some of it will go to paying down debt and some will go into buying assets.
We’re already seeing this in retail spending, and it’s been apparent in our property markets throughout the year as many homeowners upgraded their accommodation.
APRA will be watching the market carefully
Property investment is a game of finance with some houses thrown in the middle.
So far APRA has only really tapped its foot on the brake pedal; it hasn’t really pushed down hard on the brake to slow our markets down, but if the property markets continue growing too fast for their liking they are likely to introduce stricter measures.
Hopefully, they will have learned lessons from their past mistakes and remember that under their watch in 2017-8 the stricter bank lending criteria they instigated created a “credit squeeze” which didn’t just slow the markets down but stifled the property markets for quite some time.
Most property predictions will be wrong
The property pessimists will still be out there next year telling us not to invest and that our property markets are going to crash.
And as has been the case for the last few decades – they will be wrong.
The bottom line
Clearly, many of us would like to forget the last few years, but that won’t be easy.
Let’s hope 2022 will be a year we are going to want to remember. 
It will be interesting to look back at the end of the year and see how many of these trends have eventuated.
And with these forecasts of subdued growth, I can understand why some would-be investors may be questioning whether property still represents a smart investment.
On the other hand, strategic investors who have a long-term outlook will see the period of slower growth as a buying opportunity.
Sure, investors may not see annual double-digit capital growth in the short term; but the slower markets will give smart investors an opportunity to buy the type of property they’d have to compete more strongly for over the last few years when there were more buyers than sellers.
The type of property that will have them looking back in 10 years’ time saying “boy I bought that cheaply!”
READ MORE: 8 Property trends we can expect in 2022
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'Property trends and forecasts for 2022 | Property Insiders [Video]' have 30 comments
January 26, 2022 Andrew
I fixed a lot of loans 6mths ago for low 2% company/SMSF properties, I suspect rates to slightly increase. They have raised rates with major lenders fixed already so I’m perplexed why you insist they won’t rise? Clearly they are.
You mentioned CBD/city properties & divide A grade etc. Ever thought people may only be able to buy in the cheaper regionals which can & most cases serves investors well. Bank quirks now for lending
HEM
DTI
LTI
All have an effect on peoples ability to buy.
Don’t write off regionals
I’m talking some great towns in every state (except mining leave that alone) that have a great yeild & do increase over time. Even a block of dirt at the back of Bourke has increased recently…. Thanks for your insight I’m sure there’s wisdom in it but don’t discourage regionals. We’ve investing them for 20 years it’s been a blessing as we could not afford CBD in any city at the time.
January 26, 2022 Michael Yardney
Thanks for your comments Andrew and yes regional property has performed fantastically over the last 12 months, but over the long term they have underperformed capital city properties. But there’s not a fair comparison because great regional locations of underperformed poor capital city locations
October 6, 2021 Karen
Mortgage insurance concerns me as it doesn’t only cover the banks and the borrower still has to pay the loan back? I see my kids now as very vulnerable!
October 6, 2021 Michael Yardney
You are right, the banks are covered by mortgage insurance and the borrower is responsible for their debts.
Having said that people should develop good money management skills and not borrow more than they can afford to repay.
It’s unlikely the interest rates will go up for a while and hopefully your kids will not be vulnerable
September 29, 2021 Karon Cumner
In all this covid mess its been reassuring that the property market has done well. People who own property make sacrifices to get into the market. I appreciate this blog for good solid information thank you.
September 29, 2021 Michael Yardney
Thanks Karon – you’re right become financially free doesn’t just happen – you need to work for it and make sacrifices
September 15, 2021 Errol
Are we still this optimistic about Australia and its future ?
Australia has changed a lot since this blog post was submitted.
Under “normal” circumstances, I would say “yes, Australia will bounce hardly”
But we most likely won’t be under “normal” circumstances for the mid to possibly very long term anymore.
I come from a communist country, and I lived the transitional period from full democracy to becoming a tyrannical regime.
There are many strategical similarities to what’s happening in Australia, but with different colors.
If we keep this path, we won’t be ok, things will change forever
“Profits” from real estate will become irrelevant when there are no freedoms.
Even if you get “vaccinated”
September 15, 2021 Michael Yardney
This blog is updated every week Errol – and yes, we’re still optimistic
June 2, 2021 Mike Schwarz
Dr Andrew Wilson – Question on Interest Rates
It is said that the banks have been receiving cheap funding from the reserve and this ends in June. They will then need to source funding on the global market which is markedly higher. This would suggest they will have no option but to raise interest rates.
Had you factored this into your view on interest rates?
June 2, 2021 Michael Yardney
Great question Mike. I know Dr Wilson has taken this into account from our private discussions. The banks will have to borrow overseas, but look what interest rates are overseas. Of course the value of the Australian dollar will be a factor.
Remember, the RBA is keen to keep interest rates low to stimulate the economy, increase business activity and jobs growth and eventually get unemployment down. They are not not going to pull the rug out from under us
April 25, 2021 Mark
Its interesting to watch the FOMO effect on purchasing real estate at higher prices than they are worth as real estates are elevating prices during the demand. I also recently read an account of a person at auction in Sydney saying I felt like I had won lotto just because he secured the winning bid !
Now the prices are rising so quickly and people are borrowing way to much to purchase at historically low interest rates its not difficult to work out what happens next when interest rates rise again !
See household debt in Australia
https://www.finder.com.au/australias-personal-debt-reported-as-highest-in-the-world
Another concern is the misdemeanor of good debt and bad debt lets face it all debt is bad but it portrays a certain air of its ok because its good debt .. but good debt can turn bad too ie negative equity
We see the occurrence every decade or so the debt delinquency increases this last happened when interest rates were increased
I have been in a position where I have not only seen this occur but almost been burnt too .. not a good feeling but you learn by your mistakes very quickly
The oracle Buffet says be fearful when others are greedy and greedy when others are fearful
I am standing back and waiting for this supposed pandemic mayhem to cease ….
April 25, 2021 Michael Yardney
What you say is correct – some people are making poor decisions driven my FOMO – but that doesn’t mean it’s the wrong time to make a wise investment decision
August 18, 2021 Bruce Mitchell
Hi Michael,
I don’t feel the question was answered, what’s GOING TO happen, up, down, you hint it’s not, but I agree with one of your comments above.
Interest rates are going higher, people have overspent and it’s gonna crash soon.
I’ve been wrong till now and hope I continue to be,
Tho it’s a time bomb waiting g and it’s gonna be bad but with opportunities opened.
You and all real estate keep talking it up, that’s your job, I just don’t agree.
Cheers
August 18, 2021 Michael Yardney
Bruce, with so many unknowns what’s going to happen in the short-term is very hard to forecast, but I tend to avoid forecasts and have expectations instead.
I expect we will have some difficult times and some good times, but I don’t know when they will occur.
I expect we will learn to live with the coronavirus, but I don’t know how long it will take, and I expect the underlying fundamentals will keep driving up our property markets, not because I’m in eternal optimist it because I’m a realist and I don’t fight the big trends.
April 2, 2021 Mary
@Joseph
Your comment about “Australia heading towards Japan” and being over 1T in debt
Have you seen this link lately?
https://www.usdebtclock.org/world-debt-clock.html
Australia is doing AMAZINGLY WELL compared to the rest of the world.
I suggest to try removing the lens of pessimism and looking at life in general with a more realistic and optimistic outlook
People are angry when prices go down
People are angry when prices go up
Can’t seem to win either way eh?
April 2, 2021 Michael Yardney
Well said
March 3, 2021 Jennifer
90% of jobs recovered? I I don t think so. The tourism and travel sectors have been decimated and the education sector is not far behind. It s a shame that 9-5ers forget that these sectors even exist. I personally have been getting by on menial casual jobs for over a year and it looks like that will continue for most of this year as borders remain closed. Some of us have had our lives turned upside down for the foreseeable future, so No, it is not back to normal. I m lucky as I had some money and a mortgage already but I can t even go to the bank to access a better rate through refinancing as I don t tick a single box right now. And I work for a very reputable company normally – stood down definitely through no fault of theirs or mine. Not all of us are back to normal!
March 3, 2021 Michael Yardney
We quoted the Australian Bureau of Statistics latest figures. Of course for the many people like you who are still without a permanent job and the situation is terrible and we are not wanting to belittle that.
February 4, 2021 Raj Thakrar
Hi Michael,
It is too early to be generalist and say property prices will hike. There are number of factors in play here.
1 Due to lock down some sales were on hold
2 Government Incentive in play
3 Relaxed lending rule
4 Government incentive
Cost of new build artificially inflated by builders and developers sending cost of new build to new level making house price higher. The buyers technically are not benefiting for these Government incentives they are going in to builder and developers pocket. Housing in Australia is still young growing market so bubble will burst scenario does to stack up. It is always demand and supply simple economics.
February 4, 2021 Michael Yardney
Raj
The facts show property values are already increasing and have for 4 months. Yes this is driven by pent up demand.
Can they keep increasing? you may benefit from reading this: Property prices cannot keep rising at the same rate
December 10, 2020 Philip Lee
The property market didn’t collapse because the government is throwing everything at it to keep it afloat. Our property market is not a free market driven by market fundamentals. It is manipulated by the government cutting interest rates to zeo, stamp duty concessions plus first home buyer grants, and government guarantees for deposits all sucking in the financially unsophisticated into putting themselves into a life of mortgage stress. It’s just kicking the can down the road.
December 10, 2020 Michael Yardney
Philip. You are correct, our property markets have never been a “free market”, they have been manipulated by the Reserve Bank and APRA. Remember a couple of years ago when investors were dominating the market pushing up prices, the RBA raised interest rates and APRA made it much harder for banks to lend to investors and this slowed down the markets.
Currently intervention has supported our markets and that’s good. It’s the government’s job to protect its constituents – you and me and one way of doing that is providing stability to our housing market. They are too big to fail and no one will let them fail.
October 16, 2020 Joseph Battaglia
Michael your optimistic views irrespective of the true underlying data is disconcerting.
The government is covering up the reality of the situation, throwing money against the wall at all costs (hoping some will stick) and falsely propping up the economy whilst kicking the can down the road. The rhetoric from parties with bias/interest in the real estate market are also contributing to the propaganda that “things are ok and sentiment is up” – whilst reality is different.
We are not leaders on the world stage, for our real property obsession, in fact we are almost ridiculed that we are a nation that increases their wealth through selling properties to each other increasing the price at each transaction.
Its fiscally clear, we should allow the reset button to deflate this overvalued bubble and get back to reality. I mean seriously, some of these prices are ridiculous!
Are we going the way of Japan?
This QE is just irresponsible on all counts.
Over $1T in debt for such a small economy… come on, who are we kidding.
October 16, 2020 Michael Yardney
You are right Joseph, many of our industries are on life support from the government at the moment. And while the property market was being supported by loan deferrals, they seem to be cleaning themselves up nicely. What is the alternative? Do you really want to see businesses go broke and people go hungry? Our government and those around the world have learned how to handle economic downturns. And spending our way out of a downturn is a valid economic argument
October 2, 2020 Dave
Dear Michael. Your articles are interesting
and usually very well written . However this one is full of a lot of spelling and sentence construction mistakes that in parts make it hard
to follow . Take a look at where it says sh-t (Let me know if you need a proof reader ) 😉
October 2, 2020 Michael Yardney
Thanks for the heads up Dave – you are right lots of errors in this one. As I can talk faster than I can type I usually use voice to text, and it is pretty accurate. But clearly I missed a couple of bad bloopers this time.
July 24, 2020 Martin
The RBA will print money. And has printed plenty of it already to fight covid-19. It just doesn’t give the money directly to the government. It prints new money and uses it to buy government bonds on the secondary market so that institutions can take a cut as they buy the newly issued bonds from the government So that the government can pay for jobkeeper and Then these institutions onsell them to the RBA for a markup.
July 25, 2020 Michael Yardney
There has been a lot of discussion recently about Modern Monetary Theory, which suggests central banks should print more money and then give (lend) it to the government, to help pay for it debts.
This week RBA governor Philip Lowe said that he won’t do that (print extra money) instead the banks should borrow on the open market at the prevailing low interest rates because they can afford it.
Rather than print more money he gave the Morrison government the green light to increase debt levels and lock in a larger budget deficit to support the economy during its recovery from the virus crisis
June 26, 2020 Alex P.
While Dr Wilson may say that more sellers entering the market is an expression of confidence, the flip side is that it may be the smart money taking the opportunity to exit while prices are still holding up. If you drill down in the data is there a way to differentiate whether these are investment properties or owner occupied properties being sold and how does that relate to historical data. Second point is that government intervention has done a good job of addressing short term liquidity over the crisis but there have been no measures on a similar scale to address solvency, and solvency is what really matters after the liquidity tap has been turned off.
June 26, 2020 Michael Yardney
Alex, you are right on both counts.
Our experience on the ground speaking to buyers, sellers and estate agents, is that there are very few distressed properties coming on the market at present.
Similarly we do not believe the government is going to pull the rug out from under us in September after he’s gone to such an effort to support the economy and our markets