This week is a housing market update.
Four charts and two tables are included with a quick summary at the end of the visuals.
We all know that the current housing market is hot. Crazy really.
For now, demand is outstripping supply.
National dwelling values are up 20% on the year before and median weekly rents have increased by some 15% over the same time frame.
These results are at odds with the past, where both nation-wide prices and rents showed little change on an annual basis in 2018, 2019 and even 2020.
Revisit charts 1 to 4.
Values and rents even fell in some locales over this period.
Table 1 suggests that we are facing a return to tranquillity over the next 12 to 24 months.
Given the attractive range of government incentives and record low interest rates it is little surprise that there has been an increase in first home buyer activity over the past two years. See table 2.
Next year I expect to see a lot more expats and foreigners in our buying mix. First timers’ activity is also set to decline, replaced by domestic second and subsequent owner residents.
Established home buyers have been facing a lack of stock, but once lockdowns are done and dusted, stock levels are likely to lift. High prices are now also restricting buying activity and looking forward employment security plus rising interest rates/harder access to credit are starting to emerge as concerns.
The new housing market is suffering from a lack of economically priced development sites plus a lack of labour and certain construction materials. In general construction costs are currently rising above the market’s willingness (ability?) to pay and tighter credit is already starting to bite into the first home buyer market.
As a result, 2022 looks much quieter on the Australian housing market.
I do think that the forecasts as outlined table 1 are too optimistic on the price growth front and somewhat undercooked when it comes to the rental market.
Returning expats and more overseas buying interest should see rental vacancy rates tighten especially in the middle ring suburbs in our capitals cities and in places like the Gold and Sunshine Coast.
I expect the BTR sector to start to expand into the townhouse and detached housing markets from next year.
In summary, 2022 is the start of a long rest on a high plateau after an unexpected and somewhat exhausting ramble up a very steep incline.