Finder’s RBA survey: Sydney property prices to rise by $46,000 this year

Posted: 1 February 2022 5:05 pm
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House prices will continue to swell as labour shortages and supply chain issues plague property construction, according to experts.

In this month's Finder RBA Cash Rate Survey™, 36 experts and economists weighed in on the overall economy, future cash rate moves and where the property market is likely to jump the most.

While almost all panellists correctly predicted a cash rate hold in February, almost two-thirds (62%, 16/26) who provided a prediction* believe that the labour shortages and supply chain issues plaguing property construction will drive property prices even higher.

Graham Cooke, head of consumer research at Finder, said record growth couldn't continue forever.

"The house-price explosion of 2021 is coming to an end, but has not stopped. We expect to see more moderate, but still significant, price increases in 2022.

"However, there's double-trouble for prospective buyers. On top of bigger prices, expected cash rate increases will make borrowing more expensive.

"Once this happens, we can expect housing demand to gradually ease and growth in property prices to stabilise."

Predicted house and apartment values at the end of 2022

Brisbane is forecast to have the biggest gains in terms of house price growth, according to experts.

The predicted 5% increase to house prices in Brisbane would see costs increase another $37,021 on average by the end of the year.

In Sydney, the predicted 3% increase would see costs increase by $46,895 on average.

Houses

CityCurrent prices (as of October 2021)Predicted % changePredicted $ changePredicted price at the end of 2022
Sydney$1,350,0003%$46,895$1,396,895
Canberra$955,0004%$38,797$993,797
Brisbane$710,0005%$37,021$747,021
Hobart$730,0004%$32,394$762,394
Melbourne$905,0003%$31,172$936,172
Adelaide$582,5003%$18,640$601,140
Darwin$578,5003%$18,126$596,626
Perth$525,0002%$11,200$536,200
Source: CoreLogic, Finder's RBA Cash Rate Survey 2022

Apartments

CityCurrent prices (as of October 2021)Predicted % changePredicted $ changePredicted price at the end of 2022
Sydney$790,0002%$18,960$808,960
Melbourne$635,0002%$15,421$650,421
Hobart$543,0003%$14,933$557,933
Canberra$535,0003%$13,375$548,375
Brisbane$430,0003%$11,825$441,825
Adelaide$380,0003%$11,083$391,083
Darwin$380,0003%$9,817$389,817
Perth$410,0002%$6,492$416,492
Source: CoreLogic, Finder's RBA Cash Rate Survey 2022

While the current average home loan size across Australia is $595,568, just 1 in 5 (20%, 5/25) experts who weighed in believe that the average loan size will surpass $700,000 in 2022.

The Omicron effect on the Australian economy may only be minor

Expert opinions vary as to whether the most recent "soft lockdown" happening due to the Omicron variant will only cause temporary setbacks for the Australian economy.

Shane Oliver of AMP noted it will have minor and brief impact as new cases are already starting to slow.

"We have revised down our March quarter GDP growth forecast by 1 percentage point from 1.6% qoq to 0.6% qoq but have revised up subsequent quarters by the same amount. Each successive COVID wave is having less and less impact on economic activity."

Mark Crosby of Monash University said the biggest impact will be on confidence.

"Savings rates remain very high, reflecting this."

However, Christine Williams of Smarter Property Investing said the impact would be more severe.

"It is currently and will continue to be devastating."

The majority of experts (80%, 20/25) agree that reducing the number of days Australians have to isolate after testing positive for COVID-19 would help the economy recover faster.

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

Here's what our experts had to say:

Nicholas Frappell, ABC Bullion: "The labour market is more resilient, and inflationary pressures more persistent, suggesting that the RBA may join other central banks in pivoting to a tighter policy sooner that was anticipated in mid 2021."

Shane Oliver, AMP: "The economy is running stronger than expected, unemployment is likely to push below 4% and this will drive an acceleration in wages growth to a 3% greater pace in the second half – meeting the conditions for an RBA rate hike later this year. The setback to growth from the Omicron wave is looking modest with new cases already slowing."

Annette Beacher, ausbiz: "I was previously of the view that November 2022 would be appropriate, but now with inflation in the band and the unemployment rate reaching the RBA's target a year ahead of schedule, it's time to get moving."

David Robertson, Bendigo Bank: "Strong employment data and demand for labour bodes well for wages growth in 2022, which should also drive core inflation higher. The RBA is still likely to increase rates later in the year, although August is now in view rather than November, assuming the Omicron wave subsides by the end of summer, helping tourism, hospitality and the services sector."

Sean Langcake, BIS Oxford Economic: "There is less spare capacity in the labour market entering 2022 than the RBA had previously expected. Moreover, underlying inflation pressures are stronger, boosted by housing construction costs. Taken together, their rate hike cycle will be brought forward compared to their earlier guidance."

Ben Udy, Capital Economics: "The surge in inflation and plunge in the unemployment rate highlights the strength in the Australian economy. The RBA will therefore end QE in February. While the RBA has previously said that it would not raise rates until wage growth was at least 3%, we think the strength in underlying inflation along with the tight labour market will convince the Bank to hike rates first in August and lift rates to 1.25% by end-2023."

Peter Boehm, CLSA Premium: "The current level of interest rates is not sustainable and does not reflect the present economic realities nor what's on the horizon. Inflation, wage pressures and the fact that other developed nations have and will start to move interest rates up means Australia will inevitably follow. It is likely interest rates will remain on hold until after the federal election because the election outcome will be a major determinant on business and consumer confidence and hence the economic outlook."

Saul Eslake, Corinna Economic Advisory: "I think it's likely that the RBA will start raising interest rates in the second half of this year, given that inflation does now seem to be well within their target band and likely to remain there, almost a year ahead of the RBA's own expectations."

Craig Emerson, Emerson Economics: "The RBA won't increase the cash rate until wages are sustainably growing strongly. Further, it will want the exchange rate to be a filip to Australia's international competitiveness."

Mark Brimble, Griffith University: "Uncertainty continues to dominate and the underlying economy (ex-COVID supply and energy pressures) needs support and will continue for some time."

Tim Nelson, Griffith University: "Inflationary pressures are building. Energy prices globally may continue to place pressure on inflation depending upon geopolitical pressures."

Tom Devitt, Housing Industry Association: "It will take time for wage and inflation pressures to become entrenched, beyond current pressures that seem to be mostly contained to fuel and housing. There is also still a great deal of uncertainty in the global economy in relation to the pandemic, financial security and geopolitical unrest."

Angela Jackson, Impact Economics and Policy: "The economic fundamentals will require an increase by the end of the 2022 – low unemployment, strong inflation and strong growth – keeping rates at 'ultra' low levels will not be sustainable."

Leanne Pilkington, Laing+Simmons: "The real estate market has started the year positively and the coming weeks will see more listings and an increase in transactions, though price growth appears to have moderated. Nevertheless, a stable real estate market is a vital contributor to the economy and the current interest rate setting supports this stability."

Nicholas Gruen, Lateral Economics: "I think the bank will act sooner than they said they'd act. Like stocks, the collective opinion of the "Very Serious People" often overshoots. It overshot timidness in cutting rates – which put lead in our recovery from the GFC for years. And I've been expecting overshooting on the other side now for a while. But who knows?"

Mathew Tiller, LJ Hooker: "Despite rising inflation and falling unemployment, the dampening effect that the Omicron wave is having on the economy will see the RBA hold the cash rate steady until the economy shows steady and consistent growth."

Geoffrey Harold Kingston, Macquarie University: "The date will be earlier than generally expected due to bad inflation numbers from the US."

Jeffrey Sheen, Macquarie University: "RBA is committed to start increasing when permanent inflation is above the target range. After many years of undershooting the target, I believe the RBA should not and probably will not raise the cash rate until 2023."

Stephen Koukoulas, Market Economics: "Inflation and wages pressure mean the current 0.1% cash rate is no longer needed. We need to see the RBA delivering a series of hikes through 2022."

Michael Yardney, Metropole Property Strategists: "The RBA will wait until wages growth and inflation remain within their desired range – there are still obstacles ahead."

Mark Crosby, Monash University: "The Fed is expected to raise rates soon, and several times in 2022. The RBA will not be able to hold off, and inflation above 3% will be confirmed by mid year."

Julia Newbould, Money Magazine: "I think that global inflation will start affecting Australia in the next few months and the RBA might move before they previously announced."

Susan Mitchell, Mortgage Choice and Smartline: "I expect the cash rate to remain on hold in February, but there is still considerable movement in the home loan interest rate market. Rising inflation has seen banks lift fixed rates considerably over the last few months, and there is growing speculation that the RBA Board may be forced to raise the cash rate in the second half of this year. Borrowers who haven't had their home loan reviewed in the past 12 months should consider speaking to their broker or bank to ensure they're getting a competitive rate on their loan."

Dr Andrew Wilson, My Housing Market: "Consistent higher wages growth set to remain below RBA target through 2022."

Rich Harvey, Propertybuyer: "RBA have said no rises till inflation and wages rise significantly."

Noel Whittaker, QUT: "This is such a tough call – but everybody knows rates will be going up soon and I can't see what the reserve bank can gain by holding any longer."

Cameron Kusher, REA Group: "While most people are bringing forward their rate hike increases and obviously CPI well and truly beat consensus. I still think the RBA will take a slow approach to hiking rates."

Jason Azzopardi, Resimac: "Don't expect both inflation and wage growth to remain sustainably in target ranges."

Christine Williams, Smarter Property Investing: "Property prices need to settle as wage growth is not inline with living and housing cost."

Clement A Tisdell, The University of Queensland: "I think interest rates will rise due to inflation rates in the USA."

Mala Raghavan, University of Tasmania: "Though RBA Governor Philip Lowe assured that the board is not expecting to increase the cash rate till 2024 due to rising inflationary pressure, many analysts predict the rate hike might happen sooner, probably in late 2022. However, the RBA will not act hastily given (i) the uncertain global economic environment and (ii) inflationary pressure is primarily driven by supply disruption rather than demand-driven. There is a possibility of a rate hike around mid-2023."

Jonathan Chancellor, Urban.com.au: "Despite all the economist excitement at above expectation CPI, the economy is going to face another bumpy year so the RBA will hold off until 2023 with their first rate rise."

Dale Gillham, Wealth Within: "The high inflation we are currently facing is not a major concern as it is being driven by a small area of our economy, caused by the current COVID situation and the resulting supply chain issues."

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

Other respondents: Jakob B. Madsen, University of Western Australia. Bill Evans, Westpac.

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