Using insights provided by members of the property industry, we've compiled a list of the major trends set to shape regional property in 2022.
Property prices will continue to grow (just not as much)
After a year of double digit price growth, many regional residents are wondering whether property price growth will continue. "While the commentary around price falls is again ramping up, the reality is that at this stage it's looking unlikely that prices will see a sharp decline in 2022," Ray White chief economist Nerida Conisbee said.
"We're heading into a period of strong economic growth, rather than a recession, and business and consumer confidence is high. Nevertheless, it's unlikely that we will continue to see the same rate of growth over the next two years that we have seen over the past two years."
CoreLogic head of research Eliza Owen said it was almost certain Australia's current run of price growth had peaked in 2021. "The constraints of slightly tighter credit conditions, the erosion of housing affordability and a higher level of listings being added to the market are expected to see softer growth rates across property values in 2022," she said. Despite this, she predicted the first few months of 2022 could see a surge in demand for regional property.
First homebuyer activity will continue to decline
The proportion of new home loans taken out by first-time buyers had already been falling in 2021 and would likely continue to do so in 2022.
"Although in decline, the number of first home buyer loans secured (11,402 through October) remains above the decade average (8612), but could have further to fall amid deteriorating affordability, and the winding down of first home buyer incentives, which brought forward demand," Ms Owen said. "This decline could be partially offset by any reactionary government policies in 2022, such as a refresh of federal government home loan guarantee schemes," she added.
Arjun Paliwal, the founder and head of research at buyer's agency InvestorKit, said current first home buyer schemes lacked usefulness in expensive markets. "As property prices rose to such high levels this year, many first home buyers have been priced out among major markets. The biggest challenge for those looking to buy in 2022 and beyond will be their home deposit. While money remains cheap, benefits on offer with price caps attached aren't very possible to stay under due to price growth," Mr Paliwal said.
Michelle May, principal of Michelle May Buyers Agents, said tightened lending criteria from APRA, introduced in 2021, would continue to make an impact into the new year. "APRA's announcement will continue to see a sharp decrease for first home buyers with the market being out of reach for them. ABS data shows the number of new loan commitments for first home buyers fell in September 2021 for the eighth consecutive month. As a result, they are now down 27.1 per cent compared to the same time last year."
Return to offices will lead to two-tiered regional market
Ms Conisbee said regional markets that will continue to perform well into 2022 will be those within a commutable distance to major employment hubs. "Since the start of the pandemic, we've seen the biggest move of Australians to regional areas ever recorded ... the shift was driven by strong mining and agricultural conditions, a lifestyle shift that came about from changes to the way people work, greater demand for second homes and the search for space," she explained. "Many of these will change in 2022 and as a result, it's unlikely we'll see the same strong conditions ... continuing over the next two years.
"While this is the case, it's likely that the regional shift will continue, primarily because it was already occurring prior to COVID-19. In the five years prior to the pandemic, regional areas ... saw some of the strongest price growth in Australia. It's likely that these areas, plus others within commuting distance to capital cities, will continue to see population movement, and by extension, price growth."
"Regional markets, particularly those within a few hours of capital cities, are also looking to continue their strong performance. With affordability and remote work big considerations in 2022, these markets have set themselves up for further success," Lachlan Vidler, director of Atlas Property Group, said.
Ms Owen said return to office plans could impact regional market performance in 2022. "The April 2021 edition of ABS Business Conditions and Sentiments survey indicated that while over 40 per cent of Australian firms had embraced some level of remote working since the onset of the pandemic, this is expected to decline long-term. This may limit the number of feasible relocations from major metropolitan areas over time," she said.
Construction pain to remain
Construction costs and delays have been a recurrent theme of 2021, and could continue for some time, Ms Conisbee said. "It's likely that these higher costs will continue in the first half of 2022 and may also be exacerbated by high wages costs and stockpiling of materials. By the second half of the year, it's likely that many of the supply disruptions will have flowed through and construction costs will start to moderate."
It's not just new homebuilders who need to be aware of elevated construction costs, according to Herron Todd White director of valuation policy and compliance, Kevin Brogan. "Homeowners should ensure their building insurance is adequate to cover the cost of rebuilding their homes as their existing level of cover may not have kept pace with construction costs," he said.
He said some builders would not survive the cost squeeze. "Builders who have entered into fixed price building contracts are now seeing margins squeezed or even extinguished and it is inevitable some will not survive."