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Brace for a slowdown in the coming year, this chief executive is advising the profession.
Founder and CEO of One Agency, Paul Davies, has expressed the belief that the market of the coming year will be “very different” than the one just been.
“Nobody could’ve predicted the extraordinary boom of 2021, which was as large and broad as any boom I’ve seen during my half-century in real estate,” he commented.
Mr Davies argued price growth is likely to slow in 2022 – pointing out this would occur first in the capital cities before hitting the regions, and it would accordingly see an increase in days on market.
Prefacing that this “might not be want you want to hear”, he said it’s likely “agents and principals will have to manage an environment with less turnover”.
He’s given five reasons for this prediction:
1. More stock
“More stock is reportedly already coming onto the market,” the CEO acknowledged.
He said that this means buyers could be more discerning and won’t have the same fear of missing out (FOMO) they experienced throughout 2021.
2. Finance changes
According to Mr Davies, finance will become harder to get and more expensive in the year ahead.
“APRA tightened lending criteria in late 2021 and might do more tightening in 2022,” he outlined.
“Meanwhile, interest rates are likely to drift higher, continuing a trend that started in late 2021”.
3. Cash rate chatter
Coinciding with the increased pressure on financial regulators and the like, there will be more talk about the Reserve Bank increasing the cash rate, according to the CEO.
“That will be enough to dampen buyer confidence – even if the rate rise fails to occur.”
4. The federal election
Mr Davies has warned that the 2022 federal election will negatively affect the market.
“If there’s one thing I’ve learned during my half-century in real estate, it’s that a lot of buyers suspend their decision-making before and after an election, as they wait to see how things will play out,” he said.
5. The continuing presence of COVID-19
As well as all the above, Mr Davies conceded the real estate industry “will also have to contend with an unstable international environment, due to the ever-changing COVID situation”.
Reflecting on the current market landscape, the CEO opined that “one or two of these factors alone would be enough to cause a slowdown”.
“But when you put all five of these factors together, you can see why I’m expecting market conditions in 2022 to be very different to those of 2021.”
So how should agents prepare?
As well as expecting these changes to occur, Mr Davies is instructing the profession to “prepare for it”.
Reiterating his forecast that the average office and agent will experience less turnover in 2022 than in 2021, he is advising agents and business owners to watch their expenses carefully.
He’s touted “significant” ways that real estate professionals can save money – through relocating to an office off the main street, going virtual, and even reflecting on their franchise fees.
“Other ways to save money include shopping around for insurance, internet phone and electricity; cutting unnecessary subscriptions; and refinancing your loans,” he said.
Even if the market turns against agents, Mr Davies said it is still possible for professionals to have a profitable 2022.
ABOUT THE AUTHOR
Grace Ormsby
Grace is a journalist across Momentum property and investment brands. Grace joined Momentum Media in 2018, bringing with her a Bachelor of Laws and a Bachelor of Communication (Journalism) from the University of Newcastle. She’s passionate about delivering easy to digest information and content relevant to her key audiences and stakeholders.
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