Will house prices drop in 2022?

“Australian house prices set to drop further as interest rates surge…”

“House price plunge spreads with biggest monthly decline in 39 years…”

“Australian house prices drop for the first time in two years…”

“Australian real estate: House prices to drop by as much as 15% in next 18 months…”

“House prices to plummet as huge interest rate increase expected…”

This is just a collection of the headlines that I have read recently. No one could blame a person for thinking a major house pricing correction is about to happen.

I call bull and I’ll tell you why.

When someone says house prices are going to drop, what do they mean? All house prices? Sydney house prices? Apartment prices? Melbourne house prices? 4 bedroom, 2 bathroom, double lock-up garage house prices in Jimboomba?

The reality of these headlines is they are clickbait, designed for the express purpose of freaking you out and getting you to read the article.

The whole of the Australian market property market does not move at once, Sydney is different from Melbourne, Melbourne is different from Brisbane, and so on.

Even within a market, it will move differently, Northern Brisbane is not the same as Southern Brisbane and Western Brisbane.

Within a city, you will have differences. Park Ridge is going to be different from Jimboomba.

Within the market, there will be differences, properties at the upper end of the price range are going to have far greater price swings than those at the affordable end.

This brings us to a good point around affordability. First Home Buyers tend to buy at the affordable end of the market. Property prices are driven by supply and demand. There is a lot of demand at the affordable end of the market. You have First Home Buyers, Second Home Buyers, Self-Managed Super Funds, Investors, and Overseas buyers all vying for these properties. What this creates is price stability. Often what we see is a levelling off of prices rather than a dip. This contrasts with the more expensive end of the market which can experience big price fluctuations. e.g. if things go bad, I can always sell my 1.5 million dollar property and move into something cheaper but I will move heaven and earth to hold on to my 650k 4-bedder that I have my family in as there are no other options.

Add to this that Queensland is in a rental crisis, vacancies are under 0.7% and rents are increasing at over 10% a year. Not only is it more affordable for most people to buy a home rather than rent, but the investment value of SEQ properties yields is also going to continue to lead to strong demand propping up property prices at the affordable end.

Will house prices drop in 2022? It’s an irrelevant question.

Will the First Home I am trying to buy in 2022 go down in value?

That is the question you should be asking.