What Is The Outlook on The Australian Property Market?


A 2022 Australia property market report has shown that house prices have slowed in recent months. The report points out that the housing price growth will likely fall a little by the end of the year. This develops as the Reserve Bank of Australia (RBA) begins a rapid tightening cycle to raise the cash rate after underlying inflation is higher than the expected result in Q1.

Further, the major Australian banks have issued their latest property predictions, which all point to a decline either by the end of 2022 or early 2023.

Based on the current trends and the RBA’s policy shift in response to the inflation reports, investors are concerned about the Australian property market outlook for 2022 and beyond.

So, will Australia’s property prices fall in 2022? This post highlights what may happen to the Australian property market. Let’s dive in!

1. Rise In Interest Rates May Slow Property Price Growth

Economists at the National Australia Bank expect the cash rate to rise to 1.35% by the end of 2022 and hit 2.6% in 2024. As a result, mortgage rates will increase, and the house price growth prices will reduce by 15% over the two years.

A steep decrease in prices may quickly take mortgage rates back to levels not seen since 2013. Ideally, a one percentage point increase in mortgage rates will drive up total repayments by around 12%.

Besides, the borrowing capacity will decrease, causing a significant effect on Australian housing prices.

2. Property Demand Will Continue To Be Strong Despite the Property Prices

Despite the rising inflation rates, the housing market will continue experiencing an increase. The growing property demand is driven by the national auction clearance rates, which slipped below 70%, creating a more balanced property market. In addition, the fear of missing out has been common in the Australian housing market.

Besides, inflation will slow property price growth, and buyers will become more selective, while more buyers will be in the market. The A-grade homes and investment-grade properties will experience an increased demand, which may underpin the values of these property types in the future.

The current property demand is also driven by population growth and many tenants who want to move from small dingy apartments and take the opportunity to upgrade.

More than that, low-income earners were the worst hit by the COVID-19 pandemic. Middle and high-income earners are likely to recover their income, with a good percentage opting to buy houses.

3. Expect a Two-Tier Property Market

Not all locations will experience demand for houses. Affordability issues will affect Sydney and Melbourne property market, while smaller capital cities will likely perform strongly. Growth will be fragmented within the capital cities, with properties located in the inner and middle-ring suburbs outperforming cheaper properties in the outer suburbs.

Besides, the country has emerged from the COVID-19 pandemic, and there is demand for quality properties with increased emphasis on livability. As priorities change, first-time homebuyers will be willing to pay for properties. Those who can afford them will pay a premium to work, live and play within the high-end neighbourhoods.

4. Rental House Prices Will Increase Significantly

The demand for rental properties across the Australian market will increase at historically high levels in 2023. According to Realestate.com.au, the first three months of 2022 saw a severe housing shortage.

Anyone looking for a rental property in Melbourne and Sydney understands how tough it can be to find a good home. The increased rental demand is seen in Melbourne and Sydney, with the two cities reporting surges of up to 59.6% and 52.2%, respectively.

The persistent low volume of rental properties creates challenges for would-be renters, highlighted by rental demand per listing basis. The increased demand is causing upward pressure on price growth. Vacancy rates below 1% are already the norm. Consequently, rents are rising strongly in cities and regional centres.

5. Australia’s Housing Boom May Deflate As Mortgage Rates Rise

We have seen that the Australian property market will likely grind almost to a halt this year. Besides, experts project an 8% decline in 2023 as the cost of living crisis worsens and the mortgage rates increase.

Given these trends, the crash risk is something we cannot ignore. Ideally, the rise in borrowing costs will dent housing activity sharply. The solid supply and affordability constraints may also be headwinds for the house prices, causing a decline in demand for housing.

The affordability pressures caused by the further tightening of lending standards by the RBA will continue to put the squeeze on buyers.


With the interest rate increase, the expectation is that things will slow down considerably in 2022. The Australian property market outlook reports indicate housing price growth will slow significantly. Despite the expected tighter lending standards, properties targetting the typical first-home buyer will benefit the most, with the spike in demand expected in more affordable neighbourhoods.

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