Unless you’ve been living under a rock, you’ve heard about the interest rate rises and housing market drops happening in mid-2022. All this news can worry property investors – but you can alleviate your woes by focusing on the facts.
On this page:
Reasons to Invest
There’s one main reason why investing in property is a smart idea right now—because property investment isn’t a single event, it’s a process.
Investing in property in 2022 will stay pay off in the long run, as long as you have:
- A strategic and comprehensive property plan
- Appropriate ownership structures set up (to minimise tax and protect your assets)
- A strong financial strategy plus a ‘rainy day’ buffer
If you have a long-term investment focus, now is a great time to start your property investment journey.
Percival Property Sales works closely with the Property Management & Asset Care team to ensure prospective purchasers have as much detail as possible to ascertain a property’s suitability. A current market rental appraisal is provided for every residential listing, and an assessment can be undertaken on request as to any minor works or modifications that may be required to ensure the property is entirely compliant for the rental market.
The sales team are always available to discuss current market conditions, property listings and historical activity to help you put current market forces in perspective.
All in all, your decision will depend on your current financial position and your long-term goals.
If you have any questions, the Percival Property team is here to help. You can contact us via our online form at any time.
Overview of Australia’s property market
According to CoreLogic, dwelling values dropped by 1.3% across Australia in July. Among combined capitals, values dropped by 1.4% and by 0.8% across combined regional areas.
Three capital cities still experienced rising values in July—Darwin by 0.5%, Perth by 0.2%, and Adelaide by 0.4%.
This drop comes in response to the unprecedented value increases experienced Australia-wide over the past 12 months.
Why interest rates are rising
While there’s no single reason for the current rise in interest rates, we can identify a few triggers. One cause involves inflationary pressures – you’ve probably noticed a recent cost of living surge, particularly within the fuel and grocery sectors.
The Consumer Price Index (CMI) provides data about average price increases and measures inflation. As of August 9 2022, the inflation rate is 6.1%, reflecting a quarterly increase of 1.8%.
The most significant price rises fell under three categories: new dwelling purchases, fuel, and furniture. We can attribute many of these price rises to the ongoing COVID-19 pandemic, recent flooding, and the war in Ukraine.
Recent interest rate rises aim to control inflation by slowing down our economy. The Reserve Bank of Australia tries to reduce inflation rates to around 2-3% in the medium term.
According to the Reserve Bank’s Governor, Philip Lowe, inflation rates could reach 7% by the end of 2022.
Commentators predict the capital city’s inner suburbs, especially Sydney and Melbourne, are likely to outperform properties in the outer suburbs.
Property values continue to rise in the more affordable cities of Adelaide, Perth, and Darwin, along with regional areas making investing in property within these regions a smarter long-term choice.
Professor Swan of UNSW Business School predicts that values are unlikely to fall much further in the next two to three years—so, if you have your savings and plan ready, waiting a few years is unlikely to make much difference.
Property predictions for the latter half of 2022
Predictions and property market forecasts can help you make a smarter investment choice, but you shouldn’t rely on them entirely. Doing your own research to gather a 360-degree view of potential market changes is a smart idea.
The chief economist of My Housing Market, Dr Andrew Wilson, predicts that by the end of 2022:
- Brisbane property values will be 11% higher
- Adelaide property values will rise by 12%
- Perth values will be 9% higher
- Sydney property values will fall by 6%
- Melbourne values will also drop by 6%
However, keep in mind the drops in Sydney and Melbourne market values come after a 31.6% and 19% increase, respectively.
If you need information to assist you in your decision to invest in real estate or put your plans on hold, our team is here to help. Feel free to contact our office on 02 6583 8606 or send us a message online to get your questions answered.