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Economists’ Price Growth Forecasts 2022

I believe property prices will continue to grow strongly in 2022, although you will not see similar predictions from any of Australia’s leading bank economists.

They’re mostly forecasting very small price growth this year and I’m quite sure they will be proven wrong, yet again.

When it comes to predicting property price growth, economists have a quite woeful track record – they invariably got it wrong – and usually spectacularly wrong.

The biggest mistake that we see most economists make, is that they talk about Australia as a single market.

They also tend to err on the side of negativity, because they fail to truly understand real estate markets and under-estimate the ability of real estate to deal with economic upheaval.

As a result, economists usually, frequently, get it wrong with their price forecasts.

Who could forget the doomsday warnings from bank economists and others in early 2020, as the Covid pandemic hit, with forecasts that property prices would drop by as much as 30%?

Property prices, in fact, did the opposite.

Despite the frightening forecasts, prices actually increased, pretty much across the board in 2020.

Every capital city except Melbourne, and every regional market except Western Australia, produced solid price growth in 2020.

  •  Darwin and Regional Tasmania both rose 12%,
  • Hobart and Canberra both increased about 8%,
  •  the regional markets in NSW, Queensland and South Australia all rose by between 7% and 9%,
  • Brisbane and Adelaide rose 5-6% and
  • Sydney was up 4%.

Not a bad outcome in a year in which the Big 4 Banks all predicted that prices would fall 15%, 20% — or as much as 30% in one dire scenario suggested by one of the big banks.

At the start of 2021, the big bank tipsters lined up again, with predictions of moderate price increases of between 7% and 8%.

Once again, they’re erred on the side of the negative and under-estimated the strength of the real estate sector.

They got it horribly wrong again. Across Australia the median price growth hit 25% – and went as high as 30% in some cities and regional markets.

Many individual suburbs and towns rose by more than 30%, several topped 40% and an exclusive few did better than 50% in 2021.

Real estate specialist analysts like Hotspotting and Propertyology DID forecast this major boom – but once again Australia’s gaggle of chattering economists failed to foresee it.

Not to be put off by their string of failures in the past two years, the non-experts are once again forecasting only very minor price growth – and even some price drops in some capital cities – in the year ahead.

The Australian newspaper declared on 20 January: “House prices across Australia are expected to grow by 5 per cent this year.”

Why did they say that? Because that’s what the big banks are forecasting.

Notice also that they’re treating Australia as a single market.

Again, I think they are going to be well wide of the mark.

Those who try to predict what will happen to property prices in Australia as just one market are doomed to failure.

When considering property price growth, you need to segment the market and stipulate what areas you are targeting.

The mind boggles as to how anyone could think that one generalised figure will cover off what will happen in the Darwin market, in regional Tasmania, in Perth, throughout regional Victoria and in Sydney.

It’s even folly to suggest a single growth figure for just one city.

Sydney, for example, has over 700 suburbs across the metropolitan area, as diverse as Bondi versus Penrith, or Manly versus Campbelltown.

To distil all the thousands of transactions, in those many and varied locations, into a single figure to describe “Sydney property prices” is a folly.

But that’s what most of the non-experts do.

They fail because they generalise – because they fail to understand real estate.

There is always going to be a lot of differences within city markets, and within broad state regions – and, in particular, across a nation as large as Australia.

What I can predict for 2022 is that the Brisbane and Adelaide markets are going to have significant continued price growth. They will out-perform this year.

This is based on strong ongoing demand, population growth, the affordability of the markets relative to Sydney and Melbourne, and in particular, events occurring in their local economies.

I also believe that the regional parts of New South Wales, Queensland and Western Australia will have many strong markets in 2022, with double-digit price growth.

Perth is also destined to record better growth in 2022 than it did last year.

I also think Melbourne will have a strong year. Last year, it delivered good growth despite being the most locked down city in the world.

Now that it is free of restrictions, and international borders are reopening, overseas migrants and students will return, providing another wave of demand and pushing prices higher.

So Melbourne is going to do better than any of the economists are forecasting in 2022.

Sydney has proved repeatedly that it doesn’t follow the narrow path that many economists set for it.

Last year – despite closed international borders and despite losing population to the regions – almost half of its suburbs grew in value by more than 20% and there were plenty of suburbs with growth between 25% and 40%, with one even hitting 51% in annual growth.

Sydney regularly defies economic logic, so don’t be surprised if it does so again in 2022.

All in all, get ready for a year in which many locations will defy the forecasts of the bank economists and others who are tipping single-digit rises or, in some cases, price decline.

It’s going to be another busy year in real estate markets across Australia.


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