2022 was the year that will forever be in the shadow of what was the unprecedented 2021 – the 12 months in which global and national property showed a once-in-a-generation level of growth. Yes, 2021 was the perfect property storm fueled by low-interest rates, changing buyer priorities, lockdowns and the previously unimaginable global pandemic and its endless ramifications.
With the increase in property values tapering off towards the end of 2021, 2022 was destined to be the year that saw an end to ‘bought unseen’ scenarios and FOMO-fueled frantic bidding at oversubscribed auctions. Indeed, most pundits predicted a tapering off the market, and buyers and sellers were looking forward to a ‘gentle landing’ and a return to a more ‘normal’ real estate market. So what actually happened?
House prices in Brisbane, Gold Coast, Adelaide, Sydney, Perth, and Hobart reached new record highs sometime in 2022, before tapering off the rest of the year.
Brisbane and Gold Coast, as well as Adelaide and Canberra, saw record highs for unit prices, which did not know the record value increases experienced by houses across the nation.
The third quarter of 2022 saw Sydney, Melbourne, Brisbane, Canberra and the combined capitals experience their fastest quarterly decline ever.
2022’s volume of real estate auctions declined from 2021’s record high whilst remaining 19% above the five-year average, and remained 3rd for the most auctions in any year in Australian history. There was increased ‘vendor discounting’, which means the difference between the initial asking price and the final sale price.
And then, after repeatedly assuring everyone that there would be no rate rises until 2023, the RBA raised it 8 times in 2022 alone, taking the cash rate to 3.10% per annum at this time of writing. So, what does this all translate to for you as a buyer or seller of your property in 2023?
Whilst we have not seen any significant corrections in the market, some power or balance has been restored to the sale process compared with the beginning of 2022. One indicator of this is increased vendor discounting. But as house prices softened and with borrowing terms less favourable, it gave buyers more power to negotiate.
Regardless of who you are, increases in the base cash rate will increase the rate you will pay if you rely on loans to purchase a property. Ultimately, the result is that not only can you borrow less in total, but you have to pay more to service the loan. As such, buyers may feel more empowered to negotiate, and they may have to anyway. On top of this, disciplined buyers recognise that there are likely more rate rises on the horizon (and with confidence in the authenticity of the RBAs statement), borrowers and lenders are more diligent at ensuring that borrowers have the capacity to service their mortgages if conditions change.
Love it or hate it, the ‘new normal’ is here to stay, and with recent memories of lockdowns and travel bans still fresh, we have seen this impact trickle down into what buyers are typing in when they undertake online property searches.
Top of the list for 2022 was ‘pool, waterfront, beach and view’ (and who wouldn’t dream of those things when locked in that inner city Melbourne apartment!). Aside from these recreational inspirations, people increasingly looked for ‘study, balcony, courtyard and shed’ likely reflecting a desire to work from home in a comfortable setting. And finally, ‘new property’ searches are more popular than ever, almost certainly reflecting the cost of renovations making new property way more appealing than ever.
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