This would add to the sharp 23.8% appreciation in property values through 2021, according to ABS data.
Across all capitals, REA forecasts:
- Hobart to increase 9-12%
- Brisbane to increase 8-11%
- Adelaide and Canberra to increase 6-9%
- Darwin to increase 5-8%
- Sydney and Melbourne to increase 4-7%
- Perth to increase 3-6%
The back end of 2021 brought a tapering in demand following the Australian Prudential Regulation Authority (APRA) tightening credit and borrowing capacities and the removal of COVID restrictions pushing potential buyers to pursue other avenues of spending.
REA Group Director of Economic Research Cameron Kusher said despite the strong forecasts for 2022, buyers may be less likely to dedicate as much of their income to housing in the months and years to come.
"Some potential buyers may even decide that their current home is sufficient," Mr Kusher said.
"This will likely contribute to a slowing of demand for housing and means that prices won’t rise as rapidly as they have over the past year.
"It is also expected to result in properties starting to take longer to sell, as potential buyers have more choice and less competition, meaning they don’t have to move as quickly to secure a property and may not have to pay as much of a premium."
Seeking a tree change in 2022? Check out our lists of suburbs to watch in 2022 across Brisbane, Sydney, Melbourne, Adelaide, Perth, Sunshine Coast, Gold Coast and Central Coast.
Regional property markets continue to outperform capitals
Regional housing markets continue to trend upwards, with the report revealing a price rate growth over the past year of 30.0%, compared to capital city markets at 21.7%.
Mr Kusher said flexible work arrangements and the experiences of lockdowns are pushing people out to the regions, seeking larger homes and more space.
"Throughout the combined capital cities, the gap between price growth for houses 25.2% and units at 10.8% is significantly wider than it has been in regional areas, where house prices are 31.1% higher over the year and unit prices are up 24.0%," he said.
"The average number of engaged buyers per listing saw the largest year-on-year increases occur in regional SA at 75.1%, regional Queensland at 48.0% and regional WA at 40.3%."
Source: REA Group PropTrack Property Market Outlook 2022
Regional Tasmania rounded out the top three for markets with the strongest price growth over the past year, with 33.3% - only surpassed by Darwin at 35.8% and Hobart at 34.0%.
Perth was the only major region to see prices increase by less than 10% over the year, with a 9% price growth.
Regional Australia will be the 'biggest beneficiary' of the new era of the lifestyle movement, with Propertyology's Head of Research Simon Pressley forecasting 30% growth for at least 20 'regional wonders' in 2022.
Source: REA Group PropTrack Property Market Outlook 2022
Strong sales volumes expected to continue despite lower demand
REA report figures noted an increase in the sales of properties listed on realestate.com.au, with 40.1% more sales nationally in 2021 than there were in 2020.
This increase is significant considering the length of lockdowns faced by residents in New South Wales, Victoria, and the ACT.
The largest year-on-year increases in sales were recorded in regional Northern Territory at 75.1%, Melbourne at 70.5% and regional WA at 46.6%.
"The lift in sales, driven by the low mortgage rate environment, also shows up when looking at total listings volumes, which trended much lower over the year as the additional stock available for sale was purchased," Mr Kusher said.
"There were far more buyers active in the market than sellers, with demand outstripping supply, however, that now appears to be changing, with supply lifting as demand eases a little from its recent highs.
"While sales volumes probably won’t see an equivalent uplift over the coming year, the amount of equity homeowners have, coupled with the threat of lockdowns having been largely removed, will lead to an increased preparedness to list properties for sale.
"This indicates we are likely to witness strong sales volumes again in 2022."
Buyers tipped to have 'more choice'
Mr Kusher says with the ongoing volatility in new listings and the heightened levels of demand over the past year, total listings recorded substantial year-on-year falls.
Combined capital city total listings fell by 5.4% year-on-year, while across combined regional markets there was a fall of 26.2%.
"For potential buyers, this means that the total pool of stock available for sale has reduced dramatically and contributes to the sense of urgency to inspect and submit offers for new listings as they come to the market," Mr Kusher said.
"Should new listings supply continue to sit at elevated levels over the coming months, some of that urgency is likely to ease.
"We expect vendors to recommence listings their properties for sale affording potential buyers some much-needed choice and balancing out overall demand for housing.
"For vendors, this means that they may have to adjust their price expectations."
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