Only December features the unique combination of weary eagerness as we simultaneously look forward and back – and perhaps only 2021 could feature almost nothing but record-breaking real estate figures.
So, what’s next for you and your (current or potential) home loan?
Well, we know it’s hard to take time out from frenzied Christmas shopping and baking so we’ve made life easier for you with this shortlist of 2021’s top real estate highlights plus a forecast for 2022.
Highlights of 2021
- Record low interest rates
- Record price growth
- Record regional property boom
- Housing affordability fall
- Loan numbers decrease, loan sizes increase
As Lending Loop recently recorded, the Reserve Bank of Australia (RBA) again maintained its 0.01% interest rate this month.
This makes 14 consecutive months of this stunningly low rate with no growth expected before 2023, according to RBA governor Dr Philip Lowe.
Meanwhile, in a 17-year high for the country, property prices jumped to astonishing levels this year, particularly in Brisbane and Sydney.
Australia’s five major capital cities together experienced an overall property growth of 21.17% in the 12 months to November, according to CoreLogic’s Home Value Index’s monthly indices.
Brisbane recorded the highest growth of 26.34% with Sydney not far behind at 25.82%.
Escaping to the country has been a highly popular trend in 2021, thanks to metropolitan COVID restrictions, lower property prices and greater working flexibility.
As a result, Australia’s 25 largest non-capital city regions achieved a record increase in house values in the past year, according to CoreLogic’s Regional Market Update last month.
More than 50% of these places recorded an annual rise of 20% or above with an incredible seven towns recording a growth of over 30%.
Of these latter areas, the best performers were in NSW from Southern Highlands and Shoalhaven regions (35.9%) to the Richmond-Tweed area (32.8%) while placing third was Queensland’s Sunshine Coast (32.3%).
However, the flip side to property price growth has been rapidly declining housing affordability with first-home buyers particularly feeling the pinch.
According to the Real Estate Institute of Australia’s (REIA) Housing Affordability Report (HAR), average loan sizes overall jumped 17.4% over the past 12 months while first-home buyers’ average loan size surged by 14% in the past year to $459,256.
As a result, mortgage holders now repaying lenders 36.2% of their total income for the September quarter, which is an escalation of 3.9% compared to the same period in 2020.
And while first-home buyers comprise 35% of owner-occupier property loans, this group has nevertheless decreased by 12.6% in the September quarter.
What’s should I expect in 2022?
- Record figures and demand to stabilise
- Interest rate rise
- Tighter, tougher lending conditions
- Larger household savings
In October, the Australian Prudential Regulation Authority (APRA) announced tougher home loan serviceability tests, with lenders now expected to boost their minimum interest rate buffer from 2.5%-3%.
And while the RBA is not expected to raise interest rates until 2023, or until actual inflation sits within 2%-3%, several lenders including the Commonwealth Bank and AMP are predicting a much earlier rise.
CoreLogic’s national head of residential research, Eliza Owen, believes these two “headwinds” alone will slow housing demand.
Ms Owen has also warned that the high value growth and 2021’s above-average rates of housing turnovers are unsustainable in the long term.
“Listings levels are normalising across Sydney and Melbourne, and affordability constraints are worsening across most housing markets,” she said.
“As a result, it is expected that 2022 will see far milder rates of appreciation in Australian dwelling values.”
Industry expert Michael Yardney also believes housing demand will decrease in 2022 particularly on the back of rising property values – in some areas at least and certainly not at the record rate of 2021.
He believes the impetus of low interest rates has worked its way through the system.
“With property values now being 20%-30% higher than at the beginning of this cycle at a time when wages growth has been moderate at best and minimal in real terms for most Australians …. the average home buyer won’t have more money in their pocket to pay more for their home,” Mr Yardney says.
At the same time, mortgage holders can be encouraged that Australia’s average household savings rate has jumped by 23.6% due to COVID lockdowns and travel and retail spending restrictions.
Knight Frank recently reported that one in three Australian clients (33%) surveyed for their Global Buyer Survey said their spending power has soared since the start of the pandemic.
This figure is well above the global average of 24%.
However, real estate supply isn’t keeping pace with these larger spending budgets.
“Buyer angst is likely to linger as the number of new apartments being built in prime regions over the coming years continues to diminish with increasing competition from Australians living at home and abroad,” the report revealed.
Annual national growth for mainstream residential properties is also expected to drop from 18% this year to 8% in 2022.
So, what’s next for me and my loan?
Firstly, remember that no one has a crystal ball to 100% guarantee what the future holds for you and your loan.
But we encourage you to study the above figures and statistics and to give us a call at Lending Loop to discuss any questions you have for your loan in 2022.
The “new normal” for you may mean refinancing with a new lender, finally getting the courage to buy your first home (congratulations!) or simply looking over your expected budget for the new year and discovering new ways to repay your home loan faster – or at least spend your cash more wisely!
Don’t forget the possibilities of investing either.
Whatever you decide to do, we’re always happy to help you so get in touch with us today. Merry Christmas and may your new year be a wonderful one!