Australians who buy a property because they believe the hype are more likely to lose money, a real estate expert says.
Michael Yardney, the chief executive and founder of Metropole Property Strategists, said the worse time to get into the market was when there were media reports about surging prices.
‘Investors tend to be most optimistic near the peak of the cycle, at a time when they should be the most cautious,’ he said.
‘They’re the most pessimistic when all the doom and gloom is in the media near the bottom of the cycle, when there is the least downside.’
National property values last year climbed by 22.1 per cent to $709,803 with some months recording the fastest annual price rises since 1989, CoreLogic data showed.
Australians who buy a property when the market is peaking because they believe the hype are more likely to lose money, a real estate expert says (pictured is an auction at Paddington in Sydney’s eastern suburbs)
Commonwealth Bank predictions for home prices
SYDNEY: 2021 (Up 27 per cent); 2022: (Up 6 per cent); 2023 (Down 12 per cent)
MELBOURNE: 2021 (Up 17 per cent); 2022 (Up 8 per cent); 2023 (Down 10 per cent)
CANBERRA: 2021 (Up 26 per cent); 2022 (Up 7 per cent); 2023 (Down 10 per cent)
BRISBANE: 2021 (Up 26 per cent); 2022 (Up 9 per cent); 2023 (Down 8 per cent)
ADELAIDE: 2021 (Up 22 per cent); 2022 (Up 6 per cent); 2023 (Down 8 per cent)
PERTH: 2021 (Up 13 per cent); 2022 (Up 3 per cent); 2023 (Down 9 per cent)
HOBART: 2021 (Up 29 per cent); 2022 (Up 5 per cent); 2023 (Down 12 per cent)
DARWIN: 2021 (Up 17 per cent); 2022 (Up 7 per cent); 2023 (Down 8 per cent)
Source: Commonwealth Bank of Australia forecasts for dwellings or houses and units together
But in Sydney, median house prices rose by an even more dramatic 29.6 per cent to $1,374,970 as Brisbane’s equivalent values increased by 30.4 per cent to $782,967.
Hobart’s median house price rose by 26.7 per cent to $747,187.
Prices are expected to slow in 2022 as the banks put up their fixed mortgage rates.
The Commonwealth Bank, Australia’s biggest home lender, is forecasting Sydney’s mid-point home price growing by just 6 per cent in 2022 and falling by 12 per cent next year.
Brisbane property values were expected to rise by 9 per cent this year and drop by 8 per cent in 2023.
Hobart prices were tipped to slow to 5 per cent this year and fall by 12 per cent next year.
Propertyology is taking the opposite view, with head of research Simon Pressley predicting 20 per cent price growth for both Brisbane and Hobart in 2022.
He saw prices in Adelaide, Brisbane, Hobart and Canberra rising by 30 to 50 per cent over 2022 and 2023, with some regional areas by the coast set for even more growth.
‘The supply-demand relationship is akin to seagulls fighting over a chip,’ Mr Pressley said.
‘All of the big four banks recently released their forecasts for 2022 and 2023 with a unanimous conclusion that none of the capital cities will do better than 10 percent growth across the next two years and a few capitals were predicted to produce mild house price declines.’
Despite those forecasts, Mr Yardney advised potential investors to be wary of forecasts from economists, noting the big banks had all incorrectly predicted big property price falls at the start of the pandemic in March 2020.
‘Even though they are armed with all the research available in today’s information age, economists never seem to agree where our property markets are heading and usually get their forecasts wrong,’ he said.
‘That’s because market movements are far from an exact science.’
Sydney’s median house prices last year rose by 29.6 per cent to $1,374,970. Buyers are advised to invest in wealthy locations instead of cheap suburbs (pictured is Sydney’s Bondi Beach)
House price increases in 2021
BRISBANE: Up 30.4 per cent to $782,967
SYDNEY: Up 29.6 per cent $1,374,970
CANBERRA: Up 27.2 per cent to $1,015,900
HOBART: Up 26.7 per cent to $747,187
ADELAIDE: Up 25.8 per cent to $622,155
MELBOURNE: Up 17.9 per cent to $997,928
PERTH: Up 13.3 per cent to $553,013
DARWIN: Up 12.4 per cent to $565,080
Source: CoreLogic data on median house prices annual increases in December 2021
When it came to have a property that was less likely to fall in value, Mr Yardney said wealthy suburbs were a better bet.
‘You see, there will always be wealthy Australians who will be able to and prepared to pay more to live in these better locations – rich people don’t buy cheap properties,’ he said.
To illustrate that point, median house prices at Bondi Beach in Sydney’s eastern suburbs last year rose by 34 per cent to $4.266million, vastly outpacing the rest of the city.
Byron Bay’s on the far north coast of New South Wales has seen a 29.2 per cent increase in mid-point house prices to $2.653million.
While that is less than Sydney’s increase for 2021, this coastal haven for celebrities didn’t suffer price drops in 2020 like the big cities, with prices up 44.7 per cent since the start of the pandemic.
Wages in the year to September rose by just 2.2 per cent, a level well below the three-decade average of 3 per cent, Australian Bureau of Statistics data showed.
When mortgage rates increased, those receiving only small pay increases would struggle to keep up with their repayments or at least have little left over for other spending.
‘This means the average Australian won’t have any more in their pay packet to be able to pay $300,000 more for a property,’ Mr Yardney said.
‘If coronavirus taught us anything, it was the importance of living in the right type of property in the right neighbourhood.’
Byron Bay’s on the far north coast of New South Wales has seen a 29.2 per cent increase in mid-point house prices to $2.653million. While that is less than Sydney’s increase for 2021, this coastal haven for celebrities didn’t suffer price drops in 2020 like the big cities, with prices up 44.7 per cent since the start of the pandemic (pictured is Christmas on the main beach)
Despite those forecasts, Metropole Property Strategists CEO Michael Yardney advised potential investors to be wary of forecasts from economists, noting the big banks had all incorrectly predicted big property price falls at the start of the pandemic in March 2020 (pictured is a Propertyology graph comparing early pandemic forecasts)