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Has the Market Peaked? - February 2022

By Guest Blogger, Terry Ryder, founder,

hotspotting.com.au and propertyU

 

With the property market moving so quickly and with so many different forecasts in the media, it can be difficult for consumers to get a read on what’s really happening and whether the market has hit its peak yet.
Notwithstanding some dire predictions at the start of the pandemic in early 2020, Australia’s property market has proven to be extremely resilient.
By late 2020, we were well and truly into our first nationwide boom in 20 years.
Capital city markets and regional markets were taking off.
Many markets went to high levels in 2021 - and the good news for owners’ is, I don’t think we’ve hit the peak yet. There’s plenty of petrol left in the property tank – but not everywhere.
The key thing in understanding what will happen in 2022 is this: be wary of treating the property market as just one single market.
There are many different markets across Australia and in 2022 we are going to see much more segmentation of markets, in terms of outcomes.
Last year it seemed no one could lose. Pretty much everywhere showed great price growth. In 2022, there will be winner and losers.
So, this year I’d advise investors to be a bit more selective about where you buy.
There are plenty of good opportunities out there, but it’s important to do your research to ensure you are on the winning side.
Some locations will show price growth which matches what was achieved in 2021. Brisbane and Adelaide are set to be at the forefront of that, in terms of the capital cities. Big bank forecasts of only 4-5% growth in 2022 in these cities will be proven spectacularly wrong. They will have exceeded those predicted growth levels by March!
Among the regional markets, Queensland and New South Wales will be outperformers.
No one wants to buy into a market that has already peaked, but it can be hard to determine just where that is happening when things are moving so quickly in so many places.
Some of the first to come off the boil will be those markets which were experiencing high growth well before the start of the 2020/2021 property boom.
Take, for example, Hobart and Regional Tasmania. Those markets experienced years of solid growth leading up to the national boom. The evidence suggests they may have passed their peak and that the pace of price growth will start to taper off this year.
I’d put Regional Victoria areas such as Geelong and Ballarat in that category as well and in Queensland markets such as the Sunshine Coast. These regional cities have had 3-4 excellent years of price growth and are probably close to their peak – although all will continue to be good places to own real estate, as they have the credentials for long-term performance.
Beyond those few, many places are still quite early in their growth cycles, but it’s more important than ever to ensure locations you want to invest in have the right fundamentals in place for sustainable price growth.
Last year people were just throwing money pretty much at anything that came on the market, regardless of location.
They were buying properties in places which really don’t have the credentials for long-term price growth and those buyers may end up disappointed, once the frenzy is over, with the capital growth they achieve long-term.
To ensure you buy wisely in 2022, keep an eye out for locations with more than one economic driver. Don’t pick one-horse towns reliant on just one industry like tourism or agriculture.
You also need to ensure there is solid future infrastructure spending in the mix and plenty of job opportunities being generated. Lifestyle features are another big element attracting buyers in the current climate.
Even though I’d advise people to be a little more selective about where to buy this year, it’s still a good time to buy in many locations. Don’t adopt a wait-and-see attitude.
Anyone who held off 12 months ago, waiting to see if prices would drop (as some predictions suggested), will be paying 20-30% more for the same property now.
Property prices are not about to fall, despite the constant media speculation about interest rate rises resulting in property prices reversals.
History shows us that an interest rate rise or two does not cause property prices to fall. Generally, it can take five or six rate rises to slow things down and we won’t be seeing that situation any time this year. Listen to what the Reserve Bank Governor says and ignore all the speculation in mainstream media.
It’s a great time to invest in property, just invest make sure you invest in the right property.

 

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