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With real estate transaction activity set to kick back into full gear in February, the Real Estate Institute of NSW (REINSW) has identified four key predictions for the market in 2022.<\/p>\n
With real estate transaction activity set to kick back into full gear in February, the Real Estate Institute of NSW (REINSW) has identified four key predictions for the market in 2022.<\/p>\n
\u201cThe economic principles which shaped the market at the end of 2021 still apply, which means we\u00a0can expect a similar performance from the real estate market to start the new year,\u201d\u00a0<\/span> REINSW CEO Tim McKibbin said.<\/p>\n Low interest rates and the weight of demand from buyers should see the environment of steady price rises continue.\u201d\u00a0<\/p>\n \u201cElsewhere, the growth experienced in key regional markets is expected to resume, rental vacancies should stay tight and affordability will likely stagnate, given no progress has been made to address the solution to this issue, being more supply,\u201d he said.<\/p>\n Here are four key predictions from the REINSW for the year ahead:<\/p>\n Price growth will be steady and sustainable<\/strong><\/p>\n While there\u2019s a possibility the Reserve Bank will raise the official cash rate later in the year, interest rates will remain low in the short term and when they rise, they will be doing so from a historically low base.<\/p>\n This, combined with the systemic undersupply of homes to buy and rent, should continue to underpin prices, Mr McKibbin said.<\/p>\n \u201cPeak growth may have passed but we see the upward trajectory in prices remaining constant this year.<\/p>\n \u201c<\/span>Low rates and low supply make subdued, sustainable value growth for both houses and apartments a much more likely scenario than a correction,\u201d Mr McKibbin said.<\/p>\n \u201cEarly signs for the year suggest the top end of the market continues to perform well while the more affordable markets remain attractive to first home buyers.<\/p>\n \u201c<\/span>Demand is strong across buyer profiles, as owner-occupiers remain active and investors are beginning to return to the market in greater numbers.<\/p>\n \u201cWhile suburban factors will influence individual local markets, as they always will, across the board we expect small, sustainable price increases to characterise the market and vendors can be confident of achieving a strong price, while being mindful of the growth in value they have already Flood of supply a drop in the ocean<\/strong><\/p>\n With a flood of new listings to hit the market from February, transactions are set to pick up again and buyers will be presented with greater choice. But it\u2019s nowhere near enough to make a tangible impact on the broader undersupply, Mr McKibbin said.<\/p>\n \u201cAgents are ready to hit the button on a high number of listings, but it\u2019s not enough.<\/p>\n \u201c<\/span>The fundamental undersupply of housing remains and the need to create new housing is urgent.<\/p>\n \u201cThis depends on improvements to planning processes with councils facing pressure to provide clearer frameworks for new development and to embrace less adversarial relationships with developers.<\/p>\n \u201c<\/span>The strain on supply experienced in some regional markets highlights the inadequacies of existing processes and as such, no ground is being made in improving affordability.<\/p>\n \u201cThe pure numbers make it clear that the state is not creating sufficient dwellings to satisfy current, let alone future, demand.<\/p>\n \u201cEven as the market experienced a flurry of listings in late 2021, auction clearance rates remained at an extremely healthy 70 per cent-plus level week-on-week due to the weight of demand, and we expect this will resume in coming weeks,\u201d he said.<\/p>\n Pressure on regional markets won\u2019t ease any time soon<\/strong><\/p>\n Before Omicron, there was speculation that the exodus to the regions, driven by the acceptance of working from home, might be a trend that was easing as the end of lockdown, the return to the office and the opening of borders provided positive demand signs for metropolitan markets.<\/p>\n But the impact of this latest wave could have the effect of cementing regional growth as a permanent phenomenon as opposed to a temporary trend, Mr McKibbin said.<\/p>\n \u201cThis year we expect regional vacancies to remain tight and select markets will struggle to accommodate the continuing influx of people.<\/p>\n \u201c<\/span>The pressure these markets have been under will continue this year,\u201d Mr McKibbin said.<\/p>\n \u201cRecent CoreLogic data highlights the impact of this spike in demand for regional accommodation on rents, with 12.1 per cent annual regional rental growth rate recorded nationally in 2021.<\/p>\n Regional house rents have increased 33.2 per cent over the last 10 years while regional unit rents are up 41.4 per cent over the same period, vastly outpacing the combined capital city figures.<\/p>\n \u201cMany regional markets have been found wanting, unable to cope with the huge spike in demand resulting in considerable affordability challenges,\u201d he says.<\/p>\n Real estate to remain the state\u2019s revenue behemoth<\/strong><\/p>\n This year and in the years ahead, the NSW Government will continue to look to the real estate industry to be the engine room powering the state\u2019s economy through the recovery.<\/p>\n \u201cStamp duty is being collected in jaw-dropping volumes never seen before, with the current financial year budget for stamp duty on track to be exceeded by an enormous $3 billion, to $14 billion,\u201d Mr McKibbin said.<\/p>\n \u201cThe resumption of full real estate transaction activity from February will most likely see a resumption in Government revenue to the tune of $1 billion-plus coming from the industry each month.<\/p>\n \u201cYet despite this consistently enormous windfall, there remain some gaps in logic as to the Government\u2019s support for the industry on which it so heavily relies.<\/p>\n \u201c<\/span>For instance, rental moratoriums proved extremely damaging to mum and dad investors and yet landlords of some commercial premises must continue this support with rent waivers until July.<\/p>\n \u201c<\/span>The Government\u2019s plan is to take the financial difficulties of the tenant and transfer it to the landlord.<\/p>\n \u201cIt\u2019s unreasonable to require a particular sector of the economy to take on a financial burden, especially when that sector is part of an industry contributing so much.<\/p>\n \u201cMeanwhile, discussion of the Premier\u2019s property tax model has gone quiet.<\/p>\n \u201c<\/span>This is not surprising given the tax the Government is raking in under the current system, however, let there be no doubt, it hasn\u2019t come off the agenda.<\/p>\n \u201cEither way, the writing is on the wall: the NSW Government will once again look to the real estate industry to contribute more than any other to the economic recovery,\u201d Mr McKibbin said.<\/p>\n<\/p><\/div>\n
enjoyed through the boom,\u201d he said.<\/p>\n