Why Real Estate in 2022 Is Promising To Be the Biggest for Capital Growth
Becoming even more wealthier from real estate is now a thing of the future…the immediate future.
According to Bill Evans, the Chief Economist at Westpac – 2022 is promising big numbers for capital growth. Brisbane – 20 per cent, Perth – 18 per cent, Sydney – 14 per cent and Melbourne – 12 per cent.
How do we know this? Josh Frydenberg, Treasurer for the Australian Government announced it last year:
“As Australia continues to recover from COVID-19, it is more important than ever that there are no unnecessary barriers to the flow of credit to households and business.”
Australians are going to win big from this, particularly when it comes to real estate, because where money flows real estate grows.
So, what exactly is this new structural change and what will it mean for Australians?
THE GOVERNMENT’S DECISION EXPLAINED
First things first, the government in Australia structurally wants you to be spending. If they can help engineer that your property is going to be worth more, psychologically you won’t mind spending your incoming wage to stimulate further growth in the economy.
The last structural change in real estate occurred because of the Banking Royal Commission.
While it was 2009 when responsible lending laws were introduced to protect consumers from getting into debt they couldn’t get out of it, these laws weren’t exactly enforced until 2017 when the Banking Royal Commission left lenders having to highly regulate lending standards and activity.
In other words, it became extremely hard to go out and get credit. Credit did not flow, and because credit did not flow, fewer people were able to access it and even fewer people could actually buy real estate.
This meant real estate either stayed stagnant or went down in value between 2017 and early 2020. However, with the government overturning these restrictive lending laws, money will begin to flow again.
HOW STRUCTURAL CHANGES HAVE IMPACTED AUSTRALIA IN THE PAST
There are six market indicators that drive an economy:
- Economics
- Supply and demand
- Yields
- Demographics
- Population
- Infrastructure
The big wealth effect happens when one of these paradigms change.
Historically in Australia, most structural changes have created wealth. Back in the ’70s and ’80s it was based on demographic change. Single income households started to become double income households which got money flowing in the economy.
In the 1990s there was an economic decision made to deregulate the banks so that it would be easier to get credit and get that money flowing again – for real estate this meant properties doubling in value.
In the early 2000s, it was population growth from the skilled migration policies and infrastructure spending around mining which created capital growth for real estate.
In the 2010s, the structural change was an economic decision to allow more foreign capital into the country which created a boom in Sydney and Melbourne from foreign investors.
Structural change is big to the science of real estate growth – and the next structural change will be seen in 2022.
WHAT DOES THE 2022 STRUCTURAL SHIFT LOOK LIKE?
From what we’ve learned as an economic community so far it appears that the government will follow a combination of the past changes to stimulate wealth.
Credit made easy
Based on the announcement last year to scrap responsible lending laws, credit will soon be much easier to obtain. Similarly, to the 1990’s, this will see money flowing again and real estate booming in value.
Investment in mining and infrastructure
Investment in these areas creates major wage growth, and if wages grow, you’ve got more money flowing in the economy.
More foreign investment
Increased foreign investment in Australia with the potential of current property stamp duty for foreigners being reduced
Demographic trends
New buyers will be looking for real estate where they can both work, live and play. Shifts occurring from Coronavirus mean more time spent living locally – functional neighbourhoods will boom.
START PLANNING FOR NEXT YEAR
Real estate structurally is not going to disappear in value and go back to what it was worth in the 1980s. However, these new changes being implemented by the government are lining up to create the next wealth effect in real estate.
For property investors this is an exciting time. But if you miss out in 2022 you may miss out on the complete opportunity to ever become wealthy from real estate.
To ensure you don’t leave it too late, book in for one of our free property investor nights where our expert coaches will take you step-by-step through the buying process and offer valuable advice on the best areas to invest in.
By Sam Saggers
*And we’re also going to see the wealth effect occur with more foreign investment coming into Australia. There’s no stock levels. So if you allow foreigners who today are heavily taxed, they are tax big man. Like 12 1/2% to buy a property stamp duty for a foreign investment today. Once that is undone, you’re going to see no stock, extra demand and of course that huge, huge impetus on the wealth effect.
