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Is the property boom finally over?

February home loan report

The property boom may have come to an end but the outlook for 2022 remains positive, according to the latest Bluestone home loan market report from our consultant economist Dr. Andrew Wilson.

According to the February report…

Prices are still on the rise, but the growth is slowing

The Sydney and Melbourne housing markets are still strong with prices going up, but the rate of increase is slowing as overall affordability goes down. With fewer people who can afford to take out a mortgage, property demand will start to fall. 

There was some pent up demand that built up over months of COVID lockdowns. This has now been satisfied so it’s likely that things will quieten down – but not too much according to Dr. Wilson.

Affordability might be down but this year still looks like it’s going to be positive for the property market thanks to recovering local economies, the continued easing of COVID restrictions (hopefully!) and a return to high migration levels. These factors, along with a shortage of housing and continuing low interest rates are likely to keep the outlook optimistic and house prices high. 

Homes are getting less affordable

Affordability is down, according to the Bluestone home loan affordability index. This decline in affordability is driven by the increasing gap between property price growth and income growth. As the gap widens, the proportion of the average income required to service the average mortgage increases, and buying a home moves further out of reach for many Australians.  

With property prices continuing to rise faster than wages growth, the decline in home affordability is hardly surprising. The regions with the highest rate of decline in affordability are ACT, followed by the NT and SA. Overall, NSW is the least affordable state when it comes to home buying.

Over 2021, national home loan affordability dropped by a record 14.5%. While there was a short reprieve due to the lockdowns last year, affordability is once again falling, a trend that looks likely to continue through 2022. 

It’s not all doom and gloom! Investors are on the up in NSW and VIC

People are taking out bigger mortgages as house prices rise, meaning the average value of home loans has increased. The rate of increase in December was slower than earlier in the year, except in the case of investment loans, which are the fastest growing.

This indicates we’re likely to see more people buying investment property over 2022. This will be mostly limited to NSW and VIC where there was an increase in investment loans in December – other states actually recorded declines in investment loans. 

Want to know more? Read the full report here.


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