The state of the property market as we approach 2022

As we say goodbye to a second year of the COVID-19 pandemic and reflect on the 12 months just gone, many of us likely have mixed feelings.

It’s been another year defined by lockdowns, border closures, cancelled travel plans and, of course, a soaring property market.

But while many uncertainties lie ahead, overall, the economic picture looks bright.

Here’s a recap of where we have landed at the end of 2021.

We’re feeling optimistic about the future

It’s been a tough year, but consumers are feeling confident thanks to soaring vaccination rates.

The Westpac-Melbourne Institute index of consumer sentiment shows optimists are comfortably exceeding pessimists, about their finances, spending and the economy, which is particularly important in the lead-up to the Christmas shopping season.

Savings buffers are up

Lockdowns and travel restrictions have limited the way we can spend our money, and as a result, households have accumulated a lot of additional savings over the pandemic.

The latest Gross Domestic Product (GDP) figures from the Bureau of Statistics showed the household saving ratio surged to 19.8% in the September quarter, up from 11.8% in the June quarter, the fastest rise since December 2008.

Economists at the Commonwealth Bank estimate around $50 billion was saved over the three months to September, and around $240 billion over the COVID period, which is expected to support consumer spending over the next two years.

It’s also given many the chance to get ahead on their mortgage payments, with large balances in offset accounts and redraw facilities, providing a buffer against future interest rate hikes.

Borrowing costs remain low

Interest rates remain at record lows, and while there have been increases to fixed mortgage rates in recent months, variable rates have been trending lower.

Despite predictions the Reserve Bank of Australia could raise interest rates early, RBA governor Philip Lowe has dismissed speculation the first hike could occur next year, pointing to 2023 or 2024 as the most likely timing.

That means low borrowing costs are likely to stick around for a while yet, and for those in a financial position to do so, it is still an excellent time to borrow or refinance. Anyone looking for a new loan should do their research to take advantage of what’s on offer in the market.

For those who already have a loan, the current low rate environment offers an opportunity to make additional repayments, and save on interest over the long term.

Borrowers should negotiate with their lender to ensure they are getting a competitive rate or consider refinancing if their lender won’t match other options on the market.

Personal tax offsets extended

Low- and middle-income earners can expect to pay less tax for this financial year after the federal government extended the low- and middle-income tax offset (LMITO) into this financial year.

The tax offset, which is worth up to $1,080, is available for workers with a taxable income between $37,001 and $126,000.

The ATO has outlined the amount of the offset you can receive depending on your taxable income.

Taxable income Offset
$37,000 or less $255
From $37,001 to $48,000 $255 plus 7.5 cents for every dollar above $37,000 (maximum $1,080)
From $48,001 to $90,000 $1,080
From $90,001 to $126,000 $1,080 minus 3 cents for every dollar of the amount above $90,000


Tax support for businesses

Business owners can look forward to financial assistance from the government in the form of temporary full expensing and temporary loss carry back incentives, which have been extended for another year into 2023.

This should help owners invest in their business through the purchase of depreciable assets and assist them in managing cash flow.

Easy access to credit

While the banking regulator APRA recently increased the serviceability buffer used to assess home loan applications, access to credit remains relatively good, and is certainly a far cry from the lending restrictions we saw back in the last housing boom.

The latest changes reduce the maximum amount that can be borrowed, affecting those who want to borrow at maximum capacity (estimated by CBA to be around 8% of borrowers).

Property market starting to rebalance

It’s been a tough year for home buyers, with demand for residential properties vastly outstripping supply.

But new property listings on have surged in recent months as lockdown restrictions eased and borders reopened. In November, more new listings hit the market than any other month during the past seven years.

This is giving buyers much more choice in their purchases and alleviating the intense competition that saw so many buyers gazumped throughout 2021.

And while property prices have surged by more than 20% this year, price growth is expected to ease to single digits in 2022.

The value of brokers has been recognised

Recent data by the Mortgage and Finance Association of Australia (MFAA) found mortgage brokers are now responsible for more than two in every three new home loans written.

Between July and September 2021 mortgage brokers facilitated a record high of 66.9% of all new residential home loans – well above the previous record of 60.1% market share recorded a year earlier.

Strong economic growth

After the economic setback caused by the Delta outbreak, the outlook is extremely positive.

The RBA is tipping the economy to return to its pre-Delta path in the first half of 2022, as high rates of vaccination and substantial policy support underpin the recovery.

All in all, financially at least, 2022 looks like it could unfold pretty well.