2022 in review: what just happened?

BY GARETH KENT

Director,

Preston Rowe Patterson

This year has been harder on people than the previous COVID years combined.

I think everyone has found it hard to transition from a COVID crisis into COVID normal. None of it still makes sense.

There have been more fatalities in the current COVID normal phase than in the COVID crisis phase; there have certainly been more divorces (up 13.6 per cent on the previous year!).

It is like we all drank the red cordial, and now that the sugar hit has worn off.

That is also an apt description of the property market this year. The transition out of the property boom into the current cycle has been much faster than anyone predicted.

The fall in regional dwelling values is catching up with the capital cities, but it’s mild, more like a controlled descent. This has been brought on by the RBA’s engineered response to the increase in inflation.

Now we are in an adjustment phase, and overall property values have come off their peak by an average of 6 per cent.

But that is hardly a concern when we have had peaks of > 20 per cent annually over 2019-2021.

Also, the record low unemployment levels are a problem (who would have thought!) that will not be fixed overnight.

So, give some thought to those young waiters at your table this year; they are probably straight out of school and thrown into the deep end.

Employers have no other option, school leavers will be a big boost to economic activity this summer, more than ever before, as shops and restaurants will be able to stay open.

Interestingly our workforce is recovering better than America, which is due to the increase in female participation.

The low unemployment ensures that we are unlikely to enter a recession, unlike America, and we are also unlikely to have a housing market crash.

We are adjusting to a new economic and property normal.

Factors such as an average variable rate of 4.5 per cent, higher Interest Coverage Rates (ICR), and more lending criteria is ensuring we are switching from a cashed-up market to a market with far less cash, and this is exactly what the RBA wanted.

So how did you go this year? Residential property markets rose on average 23.7 per cent through 2021 yet fell by a national average of only -1 per cent in 2022.

The preliminary estimate of the total value of residential dwellings in Australia in the September quarter 2022 was $9,674.4 billion, down $358.9 billion. However, our region fared a lot better than the rest of the country; the median house price in the City of Greater Geelong for the September quarter was $795,000, up 8.9 per cent on the previous year.

The median house price in Surf Coast is $1.4m, up 23.5 per cent in the past 12 months.

Portarlington’s median house price is $957,000, up 20.3 per cent. Ocean Grove $1.2m up 29.07 per cent, Lara $710, 000 up 11.81 per cent, Bannockburn $745, 000 up 13.2 per cent.

You will be hard-pressed to find a suburb that had negative growth in our region. We have been insulated by lifestyle and affordability.

In my last couple of articles, I mentioned that we might just be seeing the Green Shoots of a stabilized market appearing, but much of this will depend on the cash rate in 2023.

CBA predicts a peak cash rate of 3.10 per cent, NAB believes it will be 3.60 per cent, and Westpac and ANZ agree it will peak at 3.85 per cent.

It is currently sitting at 3.10 per cent, so if we are not at the top of the rate cycle, we are very near it.

Let’s talk about some positive things on the horizon next year, listed in order of priority:

1. Cats to win back-to-back flags

2. Land 400 project winner announced

3. Central Geelong framework plan signed off

4. Commonwealth Games infrastructure funding announcements

5. The Airshow is back on!

Each will impact the focus on Geelong, its demand, and its liveability. When the Cats win, so does the town. It’s a fact that they bring us luck! The Land 400 project would bring thousands of new jobs to the region.

The Central Geelong Framework Plan will get the developers pumping, and the Commonwealth Game’s impact on Geelong house prices could be epic.

Conditions are looking positive for our region. So, this New Year’s Eve, kiss 2022 good-bye and let’s get some rest, recover, and recharge.

People, we are on in 2023, and we are going to be the region to watch!

Lastly, I would like to thank you for reading my articles this year, I have really enjoyed it. I want to thank John Fitzgerald, Warick Brown, Paula Allan, and everyone at the Times News Group for supporting me in this little idea, and I look forward to working with you all next year.

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