As we enter 2022, the property sector – like every market in Australia – continues to be influenced by the ongoing COVID-19 pandemic and the nation's response to its challenges. The unpredictability of the virus as it mutates and new variants emerge, and the resulting reactions from the State and Federal Government, has the potential to make forecasters look foolish, but I am always asked at the start of a new year how I see the next 12 months unfolding. With so much uncertainty, it is helpful to start with what we know. Firstly, Western Australia is coming off a reasonably strong 2021 where Perth property prices increased by around 14 per cent. However, WA is still the most affordable state in the country for housing – although the WA median price is still higher than the Northern Territory – with prices in most regions across the state yet to catch up to their 2014-15 peaks. REIWA reported average weekly sales of 865 in 2021 compared to 680 in 2020, including regular weekly sales of more than 1000 during the latter part of the year, and that trend has continued into 2022. Secondly, in the subsector of the apartment market, it has been clear for some time that demand is outweighing availability and constraints on construction and development are limiting the amount of new stock being supplied to the market. Due to the slow return of investors to the apartment sector, many developers have been unable to commence projects because they have not reached the required levels of presales to get support from their bankers. Because of this, the level of new stock in the market will continue to tighten in the coming years and, with supply reduced and demand still there, this should lead to prices increasing. The costs of materials and labour are also increasing across all sectors, leading to higher construction costs and contributing to a tightening of supply with developers unable, or unwilling, to commence projects. With demonstrable demand for accommodation and an expected undersupply of new apartment stock, we should be able to confidently predict solid price appreciation. The unknowns in the market, however, include how the Perth economy and general community respond to the state opening up to the rest of the country from February 5. As the WA economy is currently outperforming other states despite struggling with reported labour shortages and with median property prices among the lowest in Australia, I believe there will be a growing interest in the Perth property market from both interstate and overseas buyers. With the border reopening, we expect an increase in skilled migration numbers, which will put continued pressure on the rental market into 2022. This, in addition to the limited availability of new apartment stock this year and beyond, will be the driving force behind a robust local market. I also predict the number of overseas buyers to increase, particularly from Singapore and other affluent Asian markets, as buyers are attracted to the relative safety and normality of Perth. With both overseas and eastern states buyers more accustomed to apartment living and buying ahead of a development reaching completion, this may lead to increased sales of off-the-plan apartments for those considering a move to Perth. An increase in immigration, coupled with anticipated price appreciation, will see investors continue to return to the local apartment market. This will be complemented by first home buyers, who are increasingly looking at apartments as an affordable and convenient entry into the market. We believe these two sectors will make up an estimated 60 per cent of apartment sales in 2022. Skilled migrants from interstate and overseas want to be close to employment opportunities, as well as public infrastructure, transport and other amenities. Perth's apartment sector – typically in the CBD or nearby inner suburbs – is attractive to those coming to WA from other areas. The current stamp duty rebate of 50 per cent for off-the-plan sales has an October 2023 deadline, but we are hopeful it will be extended to help address affordability and stock supply issues in the Perth market.
WHAT 2022 HOLDS FOR THE REAL ESTATE MARKET
Updated: Aug 18, 2022