Will the Melbourne Property Market Crash in 2022?
It’s been an unprecedented year for property prices across the country with Australian housing values increasing by 22.1% last year. Melbourne property prices were a little slower with the upheaval of Covid and multiple lockdowns showing a growth of 15.5% according to Core Logic data.
The most commonly asked question by clients are:
1. Should I wait to buy property?
2. Will the property market crash this year?
Its is accurate to say that the unsustainable growth that we experienced last year has certainly slowed, however it has not stopped. The year-to-date trend remains positive in most regions including Melbourne.
There are many factors to consider in answering the above questions: -
Property Type
There are sub segments of properties that perform differently. For example, the highest demand in the Melbourne market post covid is for houses, town houses and villa units with a land component. This is what we describe as A grade properties and extended covid lockdowns in Melbourne have been one of the factors driving this demand. All the clients we are currently working with fall in this category except one.
Other factors that make properties more appealing than others are quiet streets, north facing and ample off-street parking.
The area – Suburb and precinct
In Blue-chip suburbs which are more desirable and the main areas we service such as Bayside and inner-city Melbourne, it is unlikely that we will see property falls that might occur in the Southeastern suburbs. However, when aggregated it will present as a market decline. Core logic demonstrated positive market growth in Melbourne in the first two months of 2022. An example of this is Black Rock, a bayside suburb which has almost doubled the Melbourne median price growth at 30.93%.
Property stock Levels are low in Blue Chip areas ON-LINE - but we find OFF-MARKET properties
There continues to be high market demand for A grade properties and multiples buyers contesting auctions. Over the last month we have seen auctions contested with a minimum of 2 and maximum of 6 bidders, some achieving results 10-20% above the reserve. Some of our clients cannot find a property that meets their requirements online and we are add value by reaching out to our agent networks and supplementing our online search with off market opportunities that are not available to the general public and not on realestate.com.au.
Interest rate rises
At this stage we expect the Reserve Bank (RBA) to keep rates unchanged this year, however the likelihood of a cash rate increase in 2022 has increased due to strong economic performance. Since the onset of the pandemic the RBA has provided economic stimulus and support and have repeatedly stated that they don’t expect conditions for a rate increase will be met until 2024. The latest communications have seen them drop that statement saying that it is unlikely that rates will be on hold until 2024 but it is unclear when they will take that step.
The return of overseas migration levels increasing demand
With Australia’s domestic and international borders largely re-opening we expect demand for property to continue to increase in certain market segments. Students and skilled migrants will have an impact on the first home buyer market most significantly and some potential impact on the higher end of the market.
In summary, market growth has certainly slowed from the unsustainable growth of 2021. However, realestate.com.au are predicting the market to grow by 4-7% this year. In my opinion, from day-to-day interactions with buyers and sales agents, I believe the growth will be even higher for A grade properties.
