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Inflation soars

Apr 29, 2022 |GODFREY DINH

The hot button topic this week was inflation. Consumer prices saw a 5.1% jump over the past year – the biggest CPI increase in 22 years, according to the ABS.

An election rate rise is on the cards for next week, and two of the big four banks have again brought forward their cash rate increase forecasts – more on that below.

Your 10 Second News Wrap

  • Industry players believe the Federal Budget did not do enough to support property investment and to boost rental accommodation for tenants who rely on it.
  • In Brisbane, the price gap between houses and apartments has crept up to 45%. The average between 2003-2015 was about 20%.
  • Demand is set to rise in Sydney’s affordable suburbs, such as Blacktown, Liverpool, and Penrith. Upsizers are also setting their sights on the Sutherland Shire.

Facts of the week

  • Property investors make up 33.3% of total new mortgage demand (excluding refinancing) in Australia, according to the latest data from Australian Bureau of Statistics.
  • This has increased from a record low of 22.9% in January 2021 but remains below the 10-year average of 34.9%.

Diving Deeper

Housing market sentiment generally remains high, but the market is still facing some headwinds, according to NAB’s latest Quarterly Residential Property Survey.

NAB Hedonic Dwelling Price Forecasts (%)

Source: CoreLogic, NAB Economics

  • Prices across all the capital cities are tipped to climb by 2.5% in 2022, before seeing a 9.3% fall in 2023. Confidence is strongest in Brisbane for 2022 and the smallest price drops are expected in Adelaide.
  • With the latest inflation data showing an increase in the cost of living by 5.1% in the past year, some banks are now predicting a cash rate hike as early as next week. While CBA and Westpac still expect the first cash rate increase in June, ANZ and NAB have brought forward their forecasts to May 3. However, Westpac reckons the first cash rate will be a lift of 40 basis points, bringing it to 0.50%. Meanwhile, NAB expects the cash rate to reach 1% by the end of 2022 and 2.25% by end of 2024.
  • Residential property markets in Western Australia and the Northern Territory recorded the highest sentiment, while Victoria logged the lowest. Confidence in the next 1-2 years is highest in Western Australia and lowest in Victoria.
  • Expectations for rental growth have strengthened since the previous quarter. Rents have been predicted to lift by 3.7% in the next year (3.5% forecast in Q4) and 4% in the next 2 years (3.3% forecast in Q4). Growth in rents is expected to outpace value growth in all states & territories.
  • First-home buyers made up 40.5% of all new development sales – the biggest buyer cohort in this market. For established dwellings, owner-occupier buyers dwarfed activity from other groups, accounting for 48% in this market. In contrast, the proportion of foreign buyers has surged to 7.9% – a near 2-year high. In NSW, 1 in 10 sales are made with foreign buyers – a 4-year high.

What does this mean for you?

  • With prices forecast to ease, you’d be forgiven for thinking it’s a bad time to buy another property. However, each city is a different market and even in each market, there are multiple sub-markets with different drivers and dynamics.

  • Firstly, migrants, international students, and foreigners on working holidays are set to flock back to Australia in the medium-term, and Sydney and Melbourne specifically are anticipated to capture the majority of these international arrivals. This will help prop up demand for property, on the sales and rental side.

  • Property investors committed to holding onto their properties long-term shouldn’t need to worry about easing prices in the next 2 years. With constrained supply of land (especially in capital cities) and tight planning restrictions, investing in property still stacks up for investors with a long-term view.

  • For property investors who ever want to sell, those with A-grade properties in quality suburbs have little to worry about in a cooling market. The demand will always be there for properties that tick all the right boxes. For example, a property purchased in the peak of the market close to amenities with spacious living areas will satisfy some of the most common criteria for family buyers, even when the market runs out of steam.
  • On the flip side, those who bought and overlooked major downsides to their property may face major penalties when the time comes to sell, no matter where they are in the cycle. That’s why the quality and location of the property is arguably more important than the state of the market.
  • You may have heard the advice to make more repayments into your mortgage while interest rates are still low. While everyone’s situation is different, it could also be wise for property investors to prioritise liquidity. It’s always a good idea to have a comfortable level of cash flow to cover unexpected costs that come with holding an investment property. At the end of the day, it is cash in the bank, not equity, that pays the expenses.

Prices at a glance



  • Housing prices in Sydney & Melbourne continued to ease for a second month in a row and are falling behind more affordable markets like Canberra, Adelaide and Brisbane. Price growth on a national level is also slowing its pace, albeit more gradually.
  • Regional markets appear to be well-insulated from the slowdown seen in the rest of the country, recording 1.7% growth across houses & units in the past month, compared with 0.3% in the combined capitals.


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