The Australian residential property market is set for another strong year thanks to buyer confidence, record low interest rates, a war chest of savings valued at $240 billion, and the Federal Government’s commitment to grow permanent migration back up to 160,000 new arrivals annually with Angus Raine, Executive Chairman Raine & Horne, predicting 10% growth for Australia's favourite asset class.

 "Our research shows that appraisals were up 51% in November 2021 compared to the same month last year. This indicates that many Australians are now more confident that we can live with the pandemic and are considering a home sale or rebalancing their investment portfolios in 2021," Mr Raine said. 

 In a further show of confidence in the Australian property market, property listings were up by more than 22% in November 2021 compared to November last year. Victorian owners proved the most confident, with listings up by almost 60%. In South Australia, listings increased by 45% in November year-on-year.

 "While it is fair to expect that the pendulum will swing back towards buyers in 2022, we are very confident that given a variety of factors the Australian real estate market demand is very deep, and this will underpin growth of 10% for Australian real estate in 2022," Mr Raine said.

 Record low interest rates set to continue in 2022

The Mid-Year Economic and Fiscal Outlook (MYEFO), released on Thursday, was chockful of good news on employment and a lower than the expected budget deficit. Yet, it is still highly unlikely that the official cash rate will be revised up in 2022, Mr Raine noted.

“Similarly, even after lenders have increased fixed rates in recent times, there is still outstanding value if you lock into 3, 4 and 5 year fixed rates over a 25-year mortgage where it’s possible to find loans charging less than 3%,” Mr Raine said.

“We expect plenty of buyers to continue to take advantage of the low interest rate environment in 2022.”

Massive savings war chest to underpin real estate demand

 The decision by Australians to stockpile a collective $240 billion in savings during the pandemic, according to the CommBank's HSI Index for November[i] is contributing to the positive outlook for bricks and mortar.

 Additionally, the ABS reports that 26% of Australians expect their household income to increase, with 11% expected to build or buy a new home[ii] , which is a massive pool of property buyers waiting to pounce.

 "This is a massive and growing war chest of savings, and we expect a large slice of this money to find a home in real estate.

 "With cash accounts paying next to nothing, while the share market will continue to be impacted by every new COVID strain such as Omicron, the smart money will find its way into real estate," said Mr Raine. 

 In October, CoreLogic estimated the total value of residential real estate in Australia surpassed a new record of $9.1 trillion. This new valuation puts housing values around 28.2% higher than the estimated value of superannuation, shares and commercial real estate combined.

 "Australian real estate has proven the asset of choice for Australians over the past two years, and this is an association that will continue in 2022," said Mr Raine.

 Migrants to power real estate

 The Federal government will increase permanent migration to around 160,000 per year to strengthen economic growth and address skills shortages. Population growth fell to its lowest rate in a century – between 2020 and 2021 – to just 0.1%[iii].

“This population intake is the growth insurance policy for the property market,” Mr Raine said.

“Throwing open the borders will be a positive for real estate markets. During the pandemic, international borders were slammed shut and overseas buyers weren’t allowed in, yet the Australian market was still able to boom with growth of over 20% over the last 12 months alone.

“With the reopening of international borders, I’m not going to say that there will be another mega boom, but we expect vendors to enjoy very good results in 2022.”

The rural and regional real estate splurge will continue in 2022

 COVID has also created renewed demand for regional and coastal real estate, which many buyers attending open homes will attest has not cooled, Mr Raine said. In 2021, combined regional real estate markets across Australia have achieved growth of 25.2% compared to a combined capital city return of 21.3% over the year to 30 November[iv]. 

 "In 2022, this regional and coastal shift will continue, with more Australians not simply moving suburbs, but they'll move to new regions." 

 Mr Raine concluded, "There's also an old saying in real estate that you only need one buyer to sell a property, but most markets still have plenty of buyer depth, and this will underpin decent price growth in 2022."

[i] https://www.commbank.com.au/articles/newsroom/2021/12/Household-spending-intentions-dec-21.html

[ii] https://www.abs.gov.au/statistics/people/people-and-communities/household-impacts-covid-19-survey/latest-release#income-and-savings

[iii] https://www.skynews.com.au/australia-news/politics/migrants-to-power-economy-in-myefo-update/video/c3b2a72ed507315facd9e43b4c456a14

[iv] https://www.corelogic.com.au/sites/default/files/2021-12/CoreLogic%20home%20value%20index%20Dec%201%202021%20FINAL.pdf