Finder’s RBA survey: Sydney property prices to rise another $102,000 in 2022

Posted: 1 November 2021 5:26 pm
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House prices are expected to reach new heights as international travel opens back up, according to experts.

In this month's Finder RBA Cash Rate Survey™, 38 experts and economists weighed in on future cash rate moves and other issues relating to the state of the economy.

While all 38 panelists expect a cash rate hold in November, more than half of economists (60%, 15/25) who weighed in* on property prices believe that the re-opening of international borders will contribute to rising prices.

Graham Cooke, head of consumer research at Finder, said the current house price surge was being driven by both owner-occupiers and local investors.

"The opening of international borders, and the return of potential overseas investors, may well re-fuel the market even further."

Just 42% (8/20) feel the Australian economy will be affected positively by the return of international travel.

While some believe it will take a long time for a significant amount of people to start travelling again, Shane Oliver of AMP Capital is worried about more people going than coming.

"I doubt it will ramp up quickly enough to have a significant impact.

"But normally tourism is a net drag on the Australian economy as we lose more from Australians travelling overseas than foreigners travelling here," Oliver said.

Predicted house and apartment values at the end of 2022

According to experts, houses are forecast to have better price growth compared to apartments in all cities.

The predicted 8% increase to house prices in Sydney would see costs increase another $102,306 on average by the end of 2022.

Houses

CityCurrent price*Expected price changeExpected price increaseExpected price at the end of 2022
Melbourne$880,0009%$74,800$954,800
Sydney$1,270,0008%$102,306$1,372,306
Brisbane$650,0008%$50,267$700,267
Canberra$905,0006%$51,515$956,515
Hobart$650,7505%$35,040$685,790
Perth$535,0005%$24,692$559,692
Adelaide$551,0005%$25,007$576,007
Darwin$578,0004%$24,454$602,454
Source: CoreLogic, Finder's RBA Cash Rate Survey 2021

Apartments

CityCurrent price*Expected price changeExpected price increaseExpected price at the end of 2022
Sydney$775,0004%$31,000$806,000
Melbourne$636,5754%$27,422$663,997
Adelaide$383,0003%$11,107$394,107
Brisbane$425,0004%$18,159$443,159
Canberra$525,0003%$14,175$539,175
Hobart$520,0003%$16,120$536,120
Perth$416,8343%$12,505$429,339
Darwin$398,0002%$9,154$407,154
Source: CoreLogic, Finder's RBA Cash Rate Survey 2021

Cooke said the average homeowner in Sydney is due to make $342,306 over 2021 and 2022.

"Sydney homeowners stand to make an eye-watering 3.5 times the average household salary of $97,211 just on their property.

"Melbournians are a distant second, with the average homeowner merely making 1.6 times the average salary," Cooke said.

More than 2 in 5 economists (42%, 8/19) believe that there has been an increase in banks knocking back loans due to final auction prices being higher than their own internal valuation.

Cooke said it's not surprising that banks are dubious about listing prices.

"It's an agent's job to garner as much hype as possible on their listed property.

"In turn this is putting more pressure on Aussie borrowers, and banks may be hesitant to take on extra risk.

"The home ownership dream is clearly still alive, but housing affordability is making the dream more difficult to come true," Cooke said.

With international travel back on the cards and international students returning, the majority of respondents (76%, 19/25) foresee an increase in the number of rental property listings.

Investor uprise, first home buyers pushed out of market

More than half of experts (59%, 13/22) agree that first home buyers are being pushed out of the property market due to increasing investor activity.

According to the ABS, Australian investors borrowed $9.75 billion in mortgage debt in September this year – the highest level in 6 years.

June through to August was the highest 3-month period in regard to the number of investor loans approved around Australia, with 55,680 loans approved.

Cooke said recent events had seen investor interest explode over the past 12 months.

"In 2020 investors were pretty cautious about property due to a number of pandemic-related policies that made it mostly unappealing to own a rental property.

"However, investors have cautiously started stepping back into the market since the eviction moratorium expired in most states in September last year."

Two-thirds of experts (63%, 12/19) believe that the October to December quarter will see even more investor loans.

*Experts are not required to answer every question in the survey

Here's what our experts had to say:

Nicholas Frappell, ABC Bullion: "I may be 'early' but I think that these events are moving ahead of the RBA's timetable, as evidenced by recent moves in the bond market."

Shane Oliver, AMP Capital: "The conditions for a rate hike – i.e. inflation sustainably in the 2–3% target range which will likely require full employment and wages growth of 3% or more – are still not met. But with recovery getting back on track they should be by 2023."

David Robertson, Bendigo Bank: "The recent surge in inflation means central banks around the world are increasing official interest rates more urgently. The RBA has sensibly positioned itself at the back of the central bank queue for rate hikes, but the queue is now moving quickly, bringing a late 2022 or early 2023 rate hike back into focus."

Sean Langcake, BIS Oxford Economics: "The RBA will 'look through' transitory inflation pressures and wait for demand-driven wage pressures to mount before raising rates."

Ben Udy, Capital Economics: "The RBA has made it clear that rates will be on hold until wage growth picks up materially. We don't think that could happen soon enough to justify a rate hike in 2022. But our view that wage growth will pick up more quickly than the RBA anticipates is why we expect a rate hike in early 2023, a year earlier than the RBA anticipates."

Peter Boehm, CLSA Premium: "Steady as she goes for now. However, given what's happening around the rest of the world with many central banks increasing interest rates, the RBA will inevitably have to increase the Cash Rate – possibly sooner than expected if inflationary pressures begin to rise."

Saul Eslake, Corinna Economic Advisory: "I continue to take at face value the RBA's commitment not to start raising rates until the labour market is sufficiently tight to generate wage inflation that's sufficiently strong to push underlying consumer price inflation sustainably into the 2–3% target range – as opposed to acting on the basis of staff forecasts that inflation will move into that range. Where I differ from the RBA is in thinking that those criteria will be satisfied sometime in the first half of 2023, rather than in 2024."

Craig Emerson, Emerson Economics: "The RBA has repeatedly said it will not increase the cash rate before 2024. It will not want to ruin its credibility."

Tony Makin, Griffith Asia Institute: "Inflation is clearly on the rise worldwide, running at over 5% in the United States and over 3% here and in Europe, all above central bank target levels. Consumers are also expecting inflation next year of 4.4% according to the latest Melbourne Institute data. The RBA will therefore be forced to act sooner rather than later should inflation continue trending upward despite its commitment to hold rates down until 2024."

Mark Brimble, Griffith University: "The RBA has to unwind stimulus prior to considering rates, and all of that with record household debt, rising house prices, stagnated wages, and underlying weakness…. Still low for longer."

Tim Nelson, Griffith University: "Inflation will start to creep into economies through global supply chains. Prudential requirements will take the heat out of the domestic property market but the RBA will eventually seek to raise rates."

Tim Reardon, Housing Industry Association: "It will take this long for the economy to generate sustained inflation and wage growth."

Leanne Pilkington, Laing+Simmons: "The Reserve Bank's stance to take a medium- to long-term outlook should see the cash rate remain unchanged for some time, even though inflationary pressures could materialize on the back of a stronger-than-expected start to the economic recovery. Growing housing affordability concerns might balance any pressure to lift rates before 2024."

Nicholas Gruen, Lateral Economics: "Recovery could be fast with substantial pressure on prices."

Mathew Tiller, LJ Hooker: "Confidence in stronger economic growth will rise as states move out of lockdown and ease restrictions, despite this improvement, the RBA will continue to hold the cash rate steady over the medium term."

Geoffrey Harold Kingston, Macquarie University: "We will move later than some countries – inflation will be slower in coming here."

Jeffrey Sheen, Macquarie University: "The RBA has committed to not increasing until inflation has risen sustainably above its target range, and this is not expected until at least 2023."

Michael Yardney, Metropole Property Strategists: "Despite the market predictions for an earlier rise the RBA has virtually said, 'read my lips – no rise till at least 2024'."

Mark Crosby, Monash University: "Inflation will be clearly above the RBA's target band through [the first half of] next year, and they will need to start raising rates in [the second half of next year]."

Julia Newbould, Money magazine: "I think there will be a slow start to 2022 and we will be waiting to see what opening international borders will do – by July we will have a better picture of inflation and may take action by raising rates."

Susan Mitchell, Mortgage Choice: "The Reserve Bank has forecast that the cash rate won't change until 2024 as the conditions for raising the cash rate – inflation sustainably within the 2–3% target and wage growth – are some way off being met. In the meantime, we can expect macro-prudential changes will have more impact on housing market activity than the cash rate as we saw with APRA tightening serviceability buffer in October."

Dr Andrew Wilson, My Housing Market: "Clearly no case for an official interest rate increase in the foreseeable future as underlying inflation and incomes growth remains stubbornly low. Recent lockdowns in Sydney and Melbourne have also impeded economic recovery of the past year."

Alan Oster, NAB: "Inflation will take a long time to sustainably be in the middle of the 2–3% range."

Malcolm Wood, Ord Minnett: "Wages to accelerate above 3% in [the second half of 2022] leading to inflation sustainably in target range in [the first half of 2023]."

Rich Harvey, Propertybuyer: "Financial markets pricing in rate rises from August next year...I think it will be December at the earliest to allow for better overall recovery."

Noel Whittaker, QUT: "There is no way they will increase rates early November. Pressure to increase rates is growing as inflation fears rise around the world. The problem is that increasing rates could put severe stress on homeowners who already are copping increased prices for fuel and food."

Mala Raghavan, University of Tasmania: "Though Australian borders are set to open gradually at the beginning of November, we are not out of the woods yet. The danger of COVID uncertainty is still hanging over Australia and the global economy. It will be a bumpy ride next year. Even with more than 80% of the population fully vaccinated, there will be spikes in COVID cases in different parts of Australia (see for example Singapore). This will cause transitory disruptions to the economy, and it can extend till 2023 before the economy functions smoothly again in the new normal environment. Till then, there is a high possibility the Australian cash rate will be accommodative with no sign of rising."

Jason Azzopardi, Resimac: "Low inflation unlikely to drive monetary policy change."

Sveta Angelopoulos, RMIT: "Unless inflationary expectations start to rise and there are signs of the economy 'overheating' there will be little incentive to increase the cash rate."

Christine Williams, Smarter Property Investing: "Global trends are on an upward direction."

Jonathan Chancellor, Urban.com.au: "The RBA will likely go earlier than advised likely late next year given inflation is on the horizon along with strong employment."

Dale Gillham, Wealth Within: "Inflation is slightly high, and whilst this may be a temporary reaction to the current COVID economy, there is potential for it to rise further and last longer."

Brodie Haupt, WLTH: "With continued lockdowns and rising pressure on the economy, I don't think there will be a change to the cash rate until 2023. It will take some time for inflation to meet the sustained 2–3% target range."

Other participants: Peter J Tulip, CIS. Alex Joiner, IFM Investors. Brian Parker, Sunsuper. Jakob Madsen, University of Western Australia. Bill Evans, Westpac.

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