Laing and Simmons

2021 was an unprecedented year for Australian housing markets. The number of home sales reached new record highs against a backdrop of below average listings and stalled migration. The majority of housing demand has originated from domestic sources, fuelled by record low mortgage rates and an accumulation of pent-up demand from prior years. As international borders re-open, rental demand is likely to be the main beneficiary, especially across the inner city rental precincts popular with students and visitors. The final months of 2021 saw housing values move through the fastest rate of annual growth since the late 1980s at a time when wages and household incomes hardly moved. Considering the worsening affordability situation, and with a federal election to be held this year, home ownership and housing affordability are likely to be hot political topics across the major parties. Sellers have held the upper hand at the negotiation table but buyers are starting to regain some leverage. With demand outweighing advertised supply, vendors have been empowered. Nationally, homes were selling in 23 days early in 2021 with minimal negotiation on advertised prices, auction clearance rates were holding over 85% in our local market. The tides have started to turn however, as new listings increased in the later part of the year. The average time on market is beginning to climb, while auction clearance rates have trended down. COVID remains the biggest wildcard, especially given surging case numbers related to the Omicron strain. A return to restrictive policies, especially those that prohibit movements or home inspections, would result in a new phase of temporary disruption to transaction activity. However, such a scenario may also prolong expansive monetary policy and low interest rates, which helped sustain housing demand through 2021. An early lift in interest rates and tighter credit policies are the other downside risks for housing. An early lift in the cash rate implies the economy has improved enough to tighten monetary policy, however housing markets are likely to be sensitive to any increase in the cost of debt. Similarly, a further tightening in housing credit policies would also act as a dampener on housing activity. Although there are some headwinds building for the housing market, we expect national housing values will continue to rise in the short term. Even if interest rates rise earlier than expected, it is likely to be a gradual process. The cost of debt is likely to remain well below long term averages, continuing to support housing demand for an extended period of time. John Kastellorios Partner – Sales Agent Laing+Simmons St George | Carss Park WHAT’S AHEAD IN 2022