With 2022 now well underway, many buyers and vendors are asking me: ‘where is the Melbourne property market headed in 2022?’
 
After the epic highs and lows of the previous two years, we’re hoping for a calmer year. However, with speculation around interest rates and a forthcoming federal election, 2022 is set to present its own unique challenges.
 
How did we get here?
Let’s take a quick look at the past five years:
  • 2017: The market was hot, with strong demand until a sudden shift in December 2017
  • 2018: The royal banking commission caused a drop in confidence, and the market continued to cool
  • 2019: A federal election had everyone on hold, due to potential changes in negative gearing tax. There was some very good buying pre-election. The few months before we went to the polls were the strongest we have seen for buyers in years. But after the election, buyer confidence began to build again.
  • 2020: The year started well, then the pandemic hit and auctions were cancelled. The very first lockdown saw a sudden drop in buyer confidence but that was short lived. After each lockdown buyer demand seemed to get stronger. Limited stock on the market saw heavy competition and prices soared.
  • 2021: demand continued to peak and FOMO was intense. The median house price in Melbourne went from 929,000 in December 2020 to $1,100,000 in December 2021, an 18% increase. Lockdowns continued to impact the ability to attend open houses and auctions. So buyers began to purchase homes sight unseen and learn how to bid at virtual auctions.
 
Now, at the beginning of 2022 the market has stabilised somewhat over the summer. It is starting to feel a bit more like ‘normal’ again. We are still seeing low stock levels for quality property. Interestingly we are seeing generalyl lower numbers out looking at open for inspections. With lower crowds, there are fewer bidders at auctions — or even sometimes no bidders at all. While some properties are passing in, there is still very strong competition on the A-grade properties. Some homes are achieveing very big prices. Overall it feels that the FOMO has subsided and we are moving into a new cycle. It is still early days. So only time and an increase in stock will tell the true story.
 

Election uncertainty

In 2019 the Melbourne market property market cooled in the lead up to a May election. Historically, whenever there is a federal election, the market sits in a holding pattern. This is due to a possibility of a change of government. Buyers and vendors usually take a wait-and-see approach. It makes sense to put property decisions on hold. Particularly if potential policies will impact taxes, the property market and housing affordability.
 
Most vendors will prefer to wait until after the election, so many will sit on their hands. Buyers are typically cautious now too. At the time of writing, we don’t know when the election will be. 21 May 2022 is the absolute latest possible election date. Pundits are predicting a May election. In April, we have school holidays, Anzac Day and Easter celebrations, so it would be unlikely to have an election then. The budget will be released in March, which also gives rise to speculation for a May election. As with 2019, this election will likely feed into the winter season, which is typically quieter.
 
If vendors hold off selling until after the election, there may be a busier than usual June market. Some vendors may be in a position to wait through winter and be ready in Spring, but we can’t be sure at this early stage.
 

Interest rate speculation

With interest rates at record lows during the pandemic it’s almost certain that the next move will see rates moving up. However, it may be some time until this occurs. The Reserve Bank is indicating that pandemic recovery is the priority. Higher rates have the potential to hit Aussies in the hip pocket. So an early increase could derail the Australian economy and buyer confidence. On the other hand, an interest rate rise will help cool a fast-growing market and help address housing affordability concerns.
 
We only know what the market is doing now, not what will happen in two months’ time. Unfortunately, we have no historical trends of post-pandemic recovery. So it is wise to watch the market closely.
 
Vendors will be understandably nervous about raising interest rates impacting buyer demand. Media speculation adds to wobbles in buyer confidence. But typically the media takes time to report the fluctuations in the market. Once the media starts reporting on a Melbourne property market trend, the horse has already bolted. We saw this last year as the RBA began adjusting lending criteria. But the media didn’t report on the speculation until it gained steam. Naturally journalists wait to see if data proves speculation. This delay in reporting can mean that media commentary further fuels speculation.
 

Market stabilisation likely

 
It will be unlikely to see the growth we’ve experienced in 2020 and 2021—it’s simply unsustainable. Already In January, buyer demand has started to feel more normal. Numbers seem to be healthy but we’ve just completed the summer holidays, which is traditionally a quieter season. We won’t know for a few more weeks when we see how the market performs into March. At this time, many properties typically go under the hammer in a post-holidays mini boom. We have not yet seen the expected number of properties on the market but it is early days.
 
Meanwhile some buyers are increasingly frustrated at the out-of-reach property prices. We see first-hand the disappointment when a property soars well beyond its quoted reserve. As a buyer, it can be difficult to know what to do when you keep missing out on auction.
 
We have housing affordability concerns and a federal election round the corner. So it’s likely to stabilise the market and the booming prices and record breaking may be less likely in 2022.
 

Advice for vendors in 2022

If you plan to sell in 2022, consider timing the market to your advantage. If you can afford to wait until after the federal election, it may be wise to do so. Given the speculation of a May election date, avoid any campaign that ends with an auction on May 7th, 14th or 21st. Whichever day the election falls, there will be very few auctions taking place if any. If you would like to sell quickly, it would most likely be wiser to get in before the auction campaign kicks off around the release of the budget on March 29th.
 
If you prefer to wait until after the election, it is typically more effective to be one of the first properties on the market before the typical surge of spring homes hit the market. With this in mind, an August campaign would be well timed to meet buyer demand that builds over a slower winter. Should you wait till spring, you may find that more properties flood the market, reducing competition. It’s wise to get in ahead of this with a late winter/early Spring sale. This avoids the AFL finals, Spring Racing Carnival and school holidays.
 

Advice for buyers in 2022

Don’t be concerned if there are few properties on the market in the lead up to the election. However, keep an eye on the listings. Seek out the good circumstantial opportunities that may arise at this time. There are still going to be strong results. But you also may find yourself with limited competition. Perhaps the property will be passed in to you at auction.
 
Be aware that interest rates are predicted to rise, so budget accordingly. Don’t overstretch based on current interest rates. Evaluate your budget based on your changing lifestyle. Are you working from home permanently? You may prefer to invest in a home that has the study area you need. Be aware of quoting trends. When competition levels are high and a property is underquoted, you’ll see more people at the open house. On the other hand, if there’s barely anybody at the open house, perhaps it’s overpriced or there’s a problem with the property that you’ve missed.
 

Need specific advice on buying or selling in Melbourne in 2022? 

Contact us for a no-obligation consultation. We can discuss your property goals and give you advice on your specific situation.

You may also like: