2022: A year ‘unlike any other’ in property

Several factors weighed on Australia’s housing market performance over the year, including worsening housing affordability from the perspective of mortgage serviceability and rents, lower consumer sentiment, high inflation (6.9 per cent), and a reduction in buyer demand leading to increased days on market.

Spurred on by the economic headwinds, particularly high inflation, the Reserve Bank of Australia’s (RBA) aggressive rate hikes — taking the cash rate to 3.1 per cent — worsened the situation for property buyers, albeit having the desired effect of slowing demand and inflation.

Compared to 2021’s property market, which saw some of the strongest annual sales turnover, 2022 is a showcase for the most resilient markets on the back of “Australia’s fastest interest rate tightening cycles in history”, CoreLogic’s annual Best of the Best report showed.

The report highlighted that not all housing markets were uniformly impacted and the pace of market headwinds.

In fact, the more expensive markets tended to see sharper declines, while the more affordable segments saw greater resilience to increases in interest rates, CoreLogic’s head of research, Eliza Owen, noted.

“The second trend is the pace of decline has been slowing on a broad basis since September,” Ms Owen said.

“While this may be seen as a positive by some, there is still risk of the decline re-accelerating in the year ahead.”

Property price declines

Over the year to November, national housing values fell 3.2 per cent, driven by the annual decline in capital city dwelling values, which dropped 5.2 per cent.

At the same period, regional dwelling values rose by 3.3 per cent over the same period, CoreLogic’s data found.

It followed the latest data from the Australian Bureau of Statistics (ABS) that showed the preliminary estimate of the total value of residential dwellings fell $358.9 billion to $9.6 trillion in the September quarter.

Estimated annual sales declined -13.3 per cent compared to the year to November 2021, with approximately 535,000 homes sold nationally.

Indeed, persistently high inflation put additional pressure on household balance sheets, making it harder for first-time home buyers to save a deposit.

Further, since the first interest rate rise, national dwelling values have fallen by -7.0 per cent, overtaking the 2008-09 downturn as the steepest national decline on record.

“This is the equivalent of a fall in the median dwelling value of approximately $53,500, to $714,475,” CoreLogic’s economist, Kaytlin Ezzy, said.

“While this has helped shift negotiating power back to the buyer and may have helped some first-home buyers get over the deposit hurdle, the significant rise in interest rates has seen the conversation around affordability shift from accessibility towards serviceability.”

To put this into perspective, under a 20 per cent deposit and a 30-year loan, the monthly mortgage repayment on the average new owner-occupier loan was $2,399 in April.

Assuming the November and December rate hikes are passed on in full, the average variable rate would rise to 5.08 per cent, adding around $698 per month to the average mortgage repayments, despite the loan principle falling by more than $42,000.

However, off the back of solid gains in 2021, CoreLogic’s data showed national dwelling values remained 28.6 per cent up on the 19-month peak to trough.

2022 market overview

Indeed, the capitals and detached homes saw the greater falls, with suburbs in Sydney’s city and inner south, Northern Beaches, and eastern suburbs regions dominating 2022’s list for largest house and unit value declines.

“Houses in Narrabeen, Surry Hills, and Redfern recorded the most significant falls in value over the year, down more than 25 per cent, while unit values in Centennial Park and Mona Vale fell by 23.1 per cent and 20.8 per cent respectively,” CoreLogic’s economist, Ms Ezzy said.

At the other end of the scale, dwelling values across Adelaide were up 13.4 per cent above the level recorded this time last year, despite a 0.9 per cent fall from the July peak.

The data showed Adelaide suburbs dominated the list for strongest annual appreciation in value across both property types, with house values across Davoren Park rising by 34.7 per cent, and unit values in Seacliff Park 41.4 per cent above the levels recorded this time last year.

Despite being more resilient to current market conditions, regional values have not been immune to the current downturn, with even the more resilient markets such as Adelaide moving past their peak.

Suburbs across NSW’s Richmond-Tweed region, which were impacted by both rising interest rates and damaging flood events, dominated the list for largest annual house value declines, while decreasing unit values across Queensland’s Townsville also featured heavily.

Popular lifestyle markets such as the Southern Highlands and Shoalhaven, and the Illawarra, south of Sydney as well as South-East Queensland’s Sunshine and Gold Coasts recorded some of the strongest peak-to-trough declines in value.

However, the report noted it is unlikely these markets will fall below the levels recorded at the beginning of COVID-19, given the high prices reported in 2022.

Property market gains since 2020: Domain

Domain’s chief of research and economics, Dr Nicola Powell, said it was inevitable that we would see an adjustment phase of the property cycle in 2022, after the soaring price growth in 2021.

The sheer height of the upswing compared to the downturn “is a reminder that homeowners or prospective buyers need to maintain an overall perspective, Ms Powell said.

“History tells us that in the last 30 years, the duration and steepness of an upswing are longer and greater than a downturn, supporting the idea that it’s not timing the market, it’s the time spent in the market that counts,” she said.

Combined capitals
Upswing: 33.6 per cent
Downturn: -4.9 per cent
Total overall gains compared to pandemic trough: 27 per cent

Combined regionals
Upswing: 32 per cent
Downturn: -1.3 per cent
Total overall gains compared to pandemic trough: 30.3 per cent

Sydney
Upswing: 40.2 per cent
Downturn: -8.3 per cent
Total overall gains compared to pandemic trough: 28.6 per cent

Melbourne
Upswing: 24.1 per cent
Downturn: -6 per cent
Total overall gains compared to pandemic trough: 16.7 per cent

Brisbane
Upswing: 42.1 per cent
Downturn: -4.3 per cent
Total overall gains compared to pandemic trough: 36.1 per cent

Adelaide
Upswing: 46.9 per cent
Downturn: 0 per cent
Total overall gains compared to pandemic trough: 46.9 per cent

Perth
Upswing: 23.8 per cent
Downturn: -1.5 per cent
Total overall gains compared to pandemic trough: 21.9 per cent

Canberra
Upswing: 50.3 per cent
Downturn: -6 per cent
Total overall gains compared to pandemic trough: 41.2 per cent

Darwin
Upswing: 41.2 per cent
Downturn: -8.1 per cent
Total overall gains compared to pandemic trough: 29.8 per cent

Hobart
Upswing: 52.2 per cent
Downturn: -3.3 per cent
Total overall gains compared to pandemic trough: 47.2 per cent

[Related: Overly aggressive hiking cycle to test housing market]

Kate Aubrey is the senior content producer of Momentum Media's mortgages titles: The Adviser and Mortgage Business.

Prior to joining Momentum Media, Kate covered regional and breaking news for ABC Radio for more than three years.

She has a Master of Arts in Journalism from the University of Melbourne and a Bachelor of International Business and Business Management from Griffith University.

Email Kate at: This email address is being protected from spambots. You need JavaScript enabled to view it.