2021 was a terrific year to be in real estate, and let me tell you, 2022 is going to be just as good if not better.
Sydney home prices jumped by 21.9 per cent in 2021, and while we won’t see that again in 2022, there will be growth and there will be high clearance rates.
When the holiday period “little nap” is over, the market will be back just as strong as ever with high seller rates and buyer inquiries. My prediction is that from 10 January, we will see a dramatic upturn as many Australians living abroad are allowed to return home keen to secure a property on the east coast.
These are savvy buyers who know property investment is safe, from both a health and political perspective, especially compared to other countries.
In my 33 years selling real estate, there has not been as much change and disruption as we have seen in the last couple of years. Sure, there have been challenges, but with these challenges comes great opportunity.
This year, I predict growth in Sydney of 10 to 12 per cent. Way below last year but still slightly above the past decade average of 8 to 10 per cent.
But the biggest change for which we have to prepare is when the Reserve Bank decides to increase the cash rate. My prediction is it will happen late 2022 or early 2023. The big banks are already increasing interest rates on fixed loans in anticipation of a rise.
Having said this, variable rates continue to be very competitive and buyers who shop around can still get rates below 2 per cent.
The problem is that they will go up within minutes of a Reserve Bank announcement, and while expected, will come as a shock to the millions of mortgage holders who have been enjoying low rates. The financial regulator APRA instructed banks and other authorised lenders that from November 2021, borrowers will need to be able to meet repayments at least 3 per cent higher than the loan product rate to receive a loan (however, this does not apply to non-bank lenders).
There is no doubt any increase will put a brake on lending.
The big question for us is when and by how much the Reserve Bank will move.
For those of us in the real estate industry, the challenge will be how we handle buyers who are reassessing their lifestyle and financial situation.
We may even consider guiding buyers to alternative locations outside their preferred area where they may get more bang for their buck. Choosing the right neighbourhood can be just as important as choosing the right house, and we are just the people to guide potential buyers.
We know that 80 per cent of a property’s performance is dependent on location and neighbourhood. In fact, some locations have outperformed others by 50 to 100 per cent over the past decade.
This said, there are opportunities for your customers. Watch a few episodes of the UK program Escape to the Country, where the “mystery house” is often a favourite but is far outside the style and location of the house criteria of the buyer. I bet every one of us can suggest a “mystery house” or two to our customers; the challenge is getting them to view.
I’m looking forward to 2022, even with the prospect of increased interest rates and our perennial challenges of supply, affordability and stagnant wage growth. Don’t you just love being in real estate?
Adrian Bo is an agent, auctioneer, director of Ray White Park Coast, and founder of the Adrian Bo sales training academy.