The last 12 months has been one of the strongest periods for the housing market in recent history. According to a recent PropTrack article, housing prices have grown at the third-fastest rate in Australia’s history.

As we say good riddance to 2021 and start preparing for the new year (hopefully free from lockdowns), I asked the experts at WBP Group to share their best property tips for 2022.

1. Don’t wait to buy real estate – Buy real estate and wait

Greville Pabst – Chairman

At the beginning of 2020, as Covid took hold, the major banks were all forecasting a double-digit drop in house prices. This forecast never eventuated. Instead, a slight drop was followed by a surge that has now resulted in record prices across Australia.

Current forecasting from the banks suggests that house prices will continue increasing in 2022, but at a much slower rate. And as interest rates start to rise, there is an expectation that 2023 will be a negative year for the market.

Forecasts are helpful, but you should always take them with a grain of salt. If you asked the ten leading economists to give you their housing predictions for 2022, I’m sure there would be some vastly different opinions.

Instead of relying on short term forecasts, remember that property is a long-term investment. If you’re planning on buying a house in 2022, you should do so with the intention of holding it for an extended period. Forget about what the market will do in 2022 and think about where house prices will be in 2030.

2. Start planning for interest rates to rise

Brendan Smith – CEO

It was 2010 when we last saw an increase in the official cash rate. Since then, the RBA has slashed rates allowing buyers to take on ever-increasing amounts of debt without raising their regular monthly repayments. This increase in borrowing capacity is one of the fundamental reasons we’ve seen such a dramatic rise in house prices.

When the RBA eventually raises their cash rate, the expectation is that the housing market will cool as it becomes harder for homeowners to service their debt.

Earlier this year, the RBA governor stated they would hold the cash rate steady until inflation hit their target band of 2% – 3%, something they expect won’t happen until 2024. However, inflation is starting to rise as the economy recovers from multiple lockdowns. It’s looking less likely that the RBA will be able to wait that long.

It is unlikely that we will ever see interest rates this low again. So, if you are already paying off a home loan, take advantage of this once in a lifetime opportunity to ramp up your repayments. And if you’re thinking about buying a house in 2022, make sure you’ve factored a rate rise into your calculations.

3. Location, location, location. It will always be important

Patrick Brady – Executive Director

The link between location and house prices remains as strong as ever. But in 2022, you can’t just buy a house in what experts consider a top suburb and leave it at that. Given the wealth of property information available, you need to do more extensive research before you buy.

While looking for a new house in a suburb with a good reputation is the right place to start, you need to dive deeper to find where the best streets and neighbourhoods are.

As a rule of thumb, if the house you are looking to purchase has a variety of amenities close by, is located in a well-regarded school zone and has access to reliable public transport, you’re on the right track to finding a great location.

4. Don’t get caught up in FOMO

Jonathan Millar – State Director Queensland

To ensure you buy an asset and not a liability, you must do your due diligence. In 2021 we saw plenty of purchasers who forgot this critical step, especially those who thought it was a good idea to buy a property sight unseen.

When doing your due diligence in Queensland, it’s essential to do a flood zone search as it may impact your ability to get building insurance. And if you’re buying a renovated Queenslander (house on stilts), check the ground floor is at the legal height.

No matter where you end up buying, make sure to check the surrounding properties for any development applications. The purchaser of a $2 million home in Brisbane found his neighbour had approval for a three-story apartment that would overlook their pool. Armed with this knowledge, they were in a fortunate position where they could cancel the contract.

And if the vendor has renovated the property, ensure they did so with council approval. Illegal building works are a nightmare to rectify.

Finally, never ever skip the Building and Pest Inspection!

5. Be careful entering into a building contract

Andreas Suwono – National Risk and Compliance Manager

Since the introduction of the HomeBuilder grant in June 2020, the number of people looking to renovate or build a new house has skyrocketed. The result has been a dramatic increase in construction costs in 2021.

While some builders have passed on the price increase to their customers, those locked into a fixed-price contract have taken a hit to their bottom line putting them under significant financial stress.

With demand still well above the long-term average, builders will continue to feel the pinch next year as they struggle to source building materials, especially timber, at an affordable price. The expectation is that some will have to make the unfortunate decision to declare bankruptcy.

If you are building in 2022, expect higher costs and possible delays in completing your project.

If you’re signing a building contract that includes numerous out of contract items or a high percentage of provisional sum allowances, you must be vigilant. Without a turnkey building contract, you may end up well over budget. And make sure you stick to the agreed progress payment schedule. Don’t pay your builder upfront for work they have not yet completed.

Real estate is understood to be a relatively safe and stable investment, especially over the long term, and a significant portion of Australians have built their wealth as their family home has increased in value over time.

But, if you fail to do your due diligence, real estate could be a terrible investment!

If you would like to get more helpful valuation insights and property related news, follow WBP Group on LinkedIn.