Over the past 12 months, the real estate market has seen it all. A surge in house prices in the residential market, competition for investment in the industrial market and a mix of highs and lows in the commercial market. 2022 is set to see even more extreme trends and changes across the industry.
In this blog, we take you through the key trends set to hit residential, commercial and industrial real estate markets in 2022.
Trends in the residential property market
From April 2021 to September 2021, Australia's residential property market reached $9.1 trillion: an annual growth rate of almost 30%. Despite this record boom in 2021, a recent report by NAB shows the housing market is set to become more relaxed in 2022 with an expected growth rate of 5% compared to 2021’s 23% for the year. Westpac seconds this, quoting an expected 8% increase for 2022, with most of this growth occurring in the first half of the year.
The Reserve Bank of Australia (RBA) may raise interest rates from their current historically low of 0.1% as a result of The Australian Prudential Regulation Authority (APRA) hiking servicing rates for lenders and reducing debt capacity for borrowers in October 2021. While the impact may be low if acted on, observers warn that regulators like APRA may soon introduce further cooling measures to support a more stable market going into 2023.
This is further supported by SQM Research who believe “Australian capital city dwelling prices will peak in the first half of 2022, with growth slowing sharply due to expected further intervention by the banking regulator to restrict home lending.”
Sydney and Melbourne will lead this downward trend in housing prices. This is a direct result of housing overvaluation and their market sensitivity to banking regulation interventions. According to SQM Research’s report, overvaluation in the housing market within Melbourne and Sydney markets will in turn generate an increased demand for units. On the flipside, Brisbane is expected to see the largest dwelling price increase across 2022, with prices set to increase by 8% to 14%. This forecast is heavily supported by interstate migration thanks to better housing affordability in comparison with Sydney and Melbourne and the rise of remote or hybrid working.
All in all, the first half of 2022 seems positive for the residential market in Australia as, should APRA and other regulators implement rules to cool the property market, this may take time and would be expected to be in place from mid-2022 onward.
Trends in the industrial property market
FY20/21 achieved records for the industrial and logistics sector within Australia achieving over 23% total return. These results have attracted strong investment interest in the industrial property sector, with industry builds set to hit 2.4 million square metres in 2022; a 60% increase in comparison to what was constructed back in 2017.
Despite the anticipated expansion, there is the supply-demand issue that’s gripping the industry. Demand is outweighing supply with the fervent rise in the eCommerce market, a shortage of zoned land and an increased need for local manufacturing or warehousing facilities due to supply chain resilience concerns. Not to mention the pressure to meet the anticipated strong economic growth of soon-to-be open borders.
So what does all this mean for the industrial property market? This expected restriction in supply will create significant competition for assets, an increase in industrial property prices and make investing within this market quite difficult in 2022.
Trends in the commercial property market
The commercial property market saw its fair share of losses across 2020 and 2021 and now, going into 2022, experts are stating this is the year for a rebound. The retail commercial sector will start to regain some of their losses as quarantine and COVID restrictions start to ease, although the increase in eCommerce remains a looming challenge. With many businesses bringing employees back to work or introducing hybrid work arrangements, office vacancy rates will start to decrease.
The recent increase in vaccination rates will also increase demand once again for hotels and student accommodation with the relaxation of border protocols across Australia.
In terms of commercial building purchases, buildings that have high environmental ratings are anticipated to sell at a premium with higher rent, lower outgoings and a reduced risk of vacancy. With a lot of people packing up and moving to more remote locations in Australia as a result of pandemic ‘epiphanies’ and a shift to remote or hybrid working, the need for commercial investment in locations outside the usual capital city radius will become more popular to cater to the population growth in regional towns.
Overall real estate market summary
So what else does 2022 have in store for real estate? Well, it’s all shaped around technology: in particular, PropTech. According to Forbes, PropTech has grown 1072% between 2015 and 2019 and in 2018 alone, $8.3 billion was invested into the digital industry. This amount is expected to keep growing. In the commercial market alone, Deloitte reported that 56% of the industry said that the pandemic revealed vulnerabilities and shortcomings in their company’s digital capabilities and technology in the real estate industry.
So how can one improve their agency's digital capabilities? The short answer is hiring qualified and skilled employees. The long answer is a bit harder to swallow with talent shortage risks at a 15-year high. Soft and hard skill sets are becoming more difficult to find, with nearly 69% of businesses having difficulty filling vacant jobs. And the pandemic has become a key factor in re-shaping in-demand skills.
Outsourcing and real estate in 2022
Change is inevitable. Whether it be a global pandemic or the usual economic changes that come from innovation, businesses must have a willingness to adapt and change to not just survive, but thrive. Outsourcing is one option available to real estate agencies, that if done well, can assist in improving efficiencies and increasing margins.
How? Check out these four benefits agencies can get from successfully outsourcing real estate services to a country such as the Philippines:
- Cost savings: save up to 70% on employment costs due to reduced overheads by engaging with outsourcing providers in low-cost economies who take care of infrastructure, operations, facilities, general management and HR or recruitment costs to name a few.
- Increased staff satisfaction improvement and retention: by having an offshore team member completed certain tasks, onshore staff can then focus on what they were hired to do.
- Opportunity to scale your agency: by choosing a low-cost alternative to employing real estate team members locally, you can reinvest these savings into revenue-generating projects and grow your agency.
- Business efficiency increases: your offshore real estate provider isn't just a supplier; they are an expert on all things outsourcing. By having them be an "extra pair of hands," you don't need to worry about managing a whole team over in the Philippines and can consult with your new provider on how you can continue to save costs or scale your agency as your relationship develops.
Want to know more?
For more information on real estate trends for 2022, our 2022 Real Estate Trend Report reviews fluctuating housing prices, increases in industrial rent and rebounding commercial markets. The pandemic's challenging economic trails have pushed businesses to seek innovative ways to ensure they thrive and survive. This report looks at the rising trend of outsourcing, market perceptions and the four key areas outsourcing can deliver significant productivity improvements and reduce costs for agencies willing to change how they do business.