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2022: What’s ahead for the Australian/Sydney property market?

By Geoff Smith

Australia’s property market soared to record highs in 2021, with values in Sydney rising 25.8 per cent in the 12 months to November 2021. Mosman performed strongly, as property values rose by an incredible 22.98 per cent in the same period. The big question, of course, is how long can this extraordinary level of growth continue?

Tighter controls

The key factors fuelling price rises in 2021 were historically low interest rates, government stimulus, a rebounding economy, improved household savings, and pandemic-driven factors such as working from home and the desire for more space.

However, we are already seeing shifts that will affect property prices across some parts of Australia in the coming year. For example, in October the banking regulator APRA (Australian Prudential Regulation Authority) announced new changes to borrower serviceability assessment in order to control household indebtedness.

Leading economists and property analysts say that tighter lending standards, combined with affordability constraints and a predicted rise in mortgage rates, will affect buyer demand and price growth. In general, they forecast that property values are set to keep climbing this year, although at a slower rate.

Will mortgage rates rise?

Mortgage interest rates have been steadily declining over the past decade and have been kept exceptionally low during the pandemic to support the economy. However, according to a recent report in Domain, mortgage interest rates are set to go up this year: ANZ expects the first hike in the first half of 2023, Westpac tips February 2023, NAB says mid-2023, while both CBA and AMP Capital predict November 2022.

The report quoted ANZ senior economist Felicity Emmett as saying that fixed rates could rise a little further before stabilising, after three-year rates rose more than 80 basis points over the last few months of 2021. “The days of sub-2 per cent mortgage rates are over for the time being,” she said.

What do the banks say about 2022 property prices?

  • ANZ is forecasting Sydney home prices will rise by just 6 per cent in the next 12 months, Melbourne to grow by 7 per cent and national growth to be 6 per cent – substantially lower than last year, but still above their long-term average performance.
  • NAB has forecast a 4.9 per cent lift in property values in 2022 and a 4 per cent fall in 2023.
  • ANZ’s outlook is a 6 per cent price hike next year and 4 per cent drop in 2023.
  • The Commonwealth Bank expects house prices to rise 7 per cent in 2022 and is forecasting a 10 per cent price drop in 2023.
    Westpac expects an 8 per cent rise in 2022 and 5 per cent correction in 2023.

What does this mean for our Lower North Shore area?

Last year to September, Mosman achieved the highest total value in sales in Greater Sydney, with a total value over 325 properties being $1,766,327,147, as recorded by CoreLogic.

And while property values are set to slow Australia-wide in 2022, the Lower North Shore remains one of Sydney’s most desirable places to live. Because of its proximity to the city, its number of waterfront and waterview houses and apartments, and amenities such as beaches, restaurants, cafes, galleries and shopping centres, there will always be a strong demand for properties from a demographic that ranges from young professionals to long-established multi-generational families.

Having worked in real estate on the Lower North Shore for the past 30 years, we have seen many generalised market predictions that have been proved inaccurate for our area. However, it’s safe to say that the first quarter of 2022 will be the litmus test for how the rest of the year will pan out.

If you’d like to discuss your home’s value today and how to achieve its best price, please get in touch.

Geoff Smith, Director
Ray White Lower North Shore Group
0418 643 923

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