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6 big property predictions for 2022


International borders opening, return of overseas investors, a new COVID strain… do you feel like you need a crystal ball to predict the future of the property market?

The good news is that we're a lot more informed than we were 18 months ago, or even 6 months ago. We have more data and the industry has definitely become more tech savvy and has caught up in a lot of ways.

The other good news is that we have some pretty solid market indicators and I have many years in the game to help you navigate the property market in the year ahead.

Here are my thoughts on property market predictions for 2022.

1. Virtual buying will continue to increase

Virtual buying will continue to be an added bonus for inspections and purchasing in 2022, which will largely be due to international borders reopening. Now that a lot of buyers have had time to adjust to the virtual buying concept, they're a lot more comfortable with the process, especially with online bidding.

Whilst it won't replace in-person auctions and inspections, it's definitely here to stay in 2022 and that isn't a bad thing. Just like working from home has opened up many recruitment options, virtual buying has done the same for the property market.

2. Inner city apartment rentals and sales will increase

With the international borders opening and the return of student and skilled labour immigration, we'll see a return to apartments being sold and rented in inner cities again.

Whilst lockdowns spurred an increase in tree and sea changes, in 2022 I'm predicting we'll see a reverse of that. Many apartments which have been sitting idle as they were marketed to skilled labour immigration and students, will now be snapped up again with our borders opening.

As we see the population increase again, we will see more buzz around the apartment market, especially in university areas.

Likewise, as we see the rise in skilled labour immigration, the general property choices are also apartments that have good access to public transport, schooling and general amenities. Affordability certainly plays a factor, as well as a typical higher level of acceptance for apartment living from overseas immigrants.

3. More expats will return home

Keeping on the theme of international borders opening up, expats will continue to buy up big and return home. I predicted this one last year and it still rings true for 2022.

With the borders opening up and 2022 looking to have less uncertainty than the previous 12 months, we will see even more expats returning home. With expats living most of their life bouncing around the world and living overseas, they're generally more comfortable living in the virtual world and with virtual buying.

Couple first home buyers

4. First home buyers will be borrowing less

In November, APRA (the Australian Prudential Regulation Authority, which is the statutory authority that supervises banking institutions), instructed that borrowers now need to be able to meet repayments at least 3% higher than the loan product rate to receive a loan.

This means borrowers will be assessed at say 5.5% than their applied loan rate of say 2.5%. This is why the maximum borrowing capacity for the average borrower may reduce by around 5% as the repayments will be assessed at the higher rate, which is quite significant when you look at the properties people could potentially afford.

With first home buyers generally borrowing more than somebody who may already be in the market and are moving on to their next property, this again is another reason why the APRA move affects first home buyers most. ABS data shows that the number of new loan commitments for first home buyers fell in September 2021 for the 8th consecutive month.

As a result of the increased assessment percentage, they are now down -27.1% compared to the same time last year. Those first home buyers that are able to still get into the market, we will see them turning back to apartments which is due to the significant price disparity between apartments and houses. This is good news for those that may be looking to sell their apartment in 2022.

5. No more FOMO

In 2022 people won't be buying into the FOMO (fear of missing out) hype that we've seen over the past 18 months. We'll see buyers be better at doing their due diligence and not racing into decisions with the fear of missing out.

As vendors will look to capitalise on the huge amount of growth over the last 18 months, more listings will mean more choice for buyers and a relatively slower incline in further price rises. Buyers will be able to be more discerning, and not jump into the wrong property too quickly without doing their due diligence.

We're also seeing much more of a segmentation in the market and we'll see that continue and grow in 2022. A-grade properties will still have underlying demand with strong prices being paid, whilst B- and C-grade properties will start to struggle more. We have already started seeing this with the influx of new listings. More properties are being withdrawn or passed in at auctions – buyers are being more astute and this is a good thing.

6. People with cash reserves will win

Whilst this is generally the case in any scenario, in 2022 this will really ring true when it comes to loan serviceability for a couple of reasons. Firstly because of APRA tightening the reins, as mentioned above, and also because banks will also be tightening the reins on their own accord.

Serviceability expectations will be tightened and reigned in to counter the rising risks in home lending. This also weighs on the responsibility of the mortgage broker to gently guide the clients in the right direction of their borrowing capacity that relates to the banking rules and guidelines.

Overall, 2022 will be a much more sensible year for the property market. Whilst prices will still increase slightly, we won't be seeing the crazy price hikes we've seen in 2021.

Michelle May has 24 years of experience as a buyer's agent in the Inner West and Eastern Suburbs of Sydney.

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