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Highlights
- Australian property prices rose by 22% last year.
- It was the sharpest rise in last three decades.
- It has to be seen if Omicron could disturb the housing market in the same manner as Delta did.
While the COVID-19 pandemic caused significant economic distress last year, Australian property prices still managed to rise by 22%, the sharpest rise in three decades. But what should now be expected as the Omicron variant has started to pose another challenge to the economy?
Well, analysts have been forecasting a fall in property prices in the current and next years on account of rising interest rates. As property became increasingly unaffordable for first-time home buyers, prices have grown at a slower pace every month.
But it would be too early to say if Omicron could disturb the housing market in the same manner as Delta did. A section of analysts believes that Omicron could only prove to be a major challenge if it impacts the ability to carry out physical inspection of the property or onsite auction.
In addition, the Reserve Bank of Australia (RBA) may not be in a hurry to raise interest rates faster than expected. The Australian central bank has said that it wouldn't raise the cash rate until inflation reached the 2 to 3% target range. Some experts are of the view that the cash rate will surge in 2023 rather than 2024.
Number of first-time home buyers falls
According to the Australian Bureau of Statistics (ABS) data, the number of fresh loans being taken out by first home buyers has declined by 11% in a year. However, the loaned amount has risen by 1% on account of a rise in housing prices.
Image Source: © Khz | Megapixl.com
Prices to rise again before falling
First-time home buyers who were expecting the property prices to cool down in 2022 would be in for bad news if leading Australian banks are anything to believe. The ‘Big 4’ banks expect the property prices to surge again in coming year before slipping in 2023.
- ANZ has forecasted a 6% price rise next year and a 4% fall in 2023.
- NAB’s outlook is a 4.9% surge in property values in 2022 and a 4% fall in 2023.
- Commonwealth Bank’s forecast predicts a 7% rise next year and a 10% drop in 2023.
- Westpac expects an 8% hike in 2022 and a 5% fall in 2023.
Bottom Line
While many predictions have come up so far amid Omicron’s emergence, nothing can be said for sure. It would be too early to say what kind of impact the new variant would have on interest rates. But, if restrictions keep coming and going, investor confidence would definitely take a hit.
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