With the economy predicted to bounce back over 2022, residential property investors should take heart – but with a few caveats.
While the expected 3.75% uplift in economic growth in 2021/22 (compared to 1.5% in the previous year) could prove to be a major boost, a sooner-than-forecast rise in interest rates and delays in re-opening international borders could inhibit returns.
The federal government’s Mid-Year Economic and Fiscal Outlook, released in December, was more positive, predicting a drop in unemployment to 4.5% and 4.25% in 2022/23 and wage growth of 2.25% and 2.75%.
“The economy and the Australian property market are always significantly intertwined, and as the economy – and wage and profit conditions – improve, then people have a lot more confidence about investing in property,” said Hayden Groves, president of the Real Estate Institute of Australia, in a Domain report. “Their family balance sheets are looking healthier, they see the value of their own homes increase, they’re ready to move to homes that better suit their aspirational lifestyle, and they’re happy to put more money into property.”
As borders open, Groves believes the country will also see a rise in rents due to more demand for rental properties, and this, in time, will also feed into properties’ capital growth.
