Can we expect a happier new year for the property market in 2023?December 13 2022
"First home buyers have a better chance to source a property with less competition than previous years." - Miguel Nitorreda, Data Analyst
After the predicted bumper $64 billion Christmas retail spending spree, what awaits us when the credit card bills roll in and more and more fixed mortgage rates begin to expire?
Well, the good news is that it will be a happy new year for some in the housing market – particularly first-home buyers, investors and those looking to purchase a holiday pad.
At the same time, however, there could be even more pain in store for others, like renters and those who bought at the peak of the market back in June and are struggling with so many interest rate rises and property price falls.
“But it’s not all gloom and doom,” says Ray White chief economist Nerida Conisbee. “We’re pretty close to the bottom of the market now in terms of price declines.
“That’s probably contentious, but the market is looking more positive now than six months ago.
“We’ve had a lot of interest rate rises [and] we’re starting to see inflation in the US come down, so it’s likely that our inflation will stabilise soon too. We may not see too many more rate rises, and the property market will start to turn a little before interest rates peak. And that’s good for 2023.”
With many agents now working through Christmas, and listings starting again on Boxing Day, January will begin well, too.
That’s not least because the Reserve Bank of Australia (RBA) board doesn’t meet again until February, so there’s no chance of an interest rate rise at the very start of the year.
The areas of Sydney to buy in next year are pretty mixed. PRD chief economist Dr Diaswati Mardiasmo tips top performers like houses in Darlinghurst and units in Forest Lodge in the inner city, Rose Bay houses and North Bondi units in the east, Five Dock houses and Annandale units in the inner west and houses in Putney and units in Chatswood in the north.
For more affordable options in liveable suburbs (with amenities within five kilometres, and jobs) and with good rental yields, she favours houses in Parramatta, Banksia and Peakhurst, and units in Parramatta, Harris Park and Riverwood.
“It is a good time to be a first-home buyer, with lower prices,” Mardiasmo says. “For investors, there’s less competition in the market, rents are high and vacancy rates are incredibly low.”
Knight Frank Australia’s 2023 Outlook Report predicts that yields will continue to rise and reflect the higher cost of funding, though the Australian market remains in a position of relative strength and stability compared to other global markets.
“While not immune from global economic and market pressures, underlying demand for Australian real estate remains high with investors repeatedly nominating Australian cities as their top targets,” chief economist at Knight Frank Australia Ben Burston says.
It’s also not bad for those looking to buy a holiday home. Many people bought them during COVID as a substitute for going overseas, but might now sell, Conisbee says. “With higher interest rates and the cost of living and electricity prices, we might see a few more of these on the market.”
As for the rest of the supply side, that’s likely to remain a challenge in 2023.
Master Builders Australia chief economist Shane Garrett forecasts there will only be 175,000 new homes built in 2023 – 55,000 fewer than in 2021. It will take until 2026 before there is a significant rise to 210,000.
“Materials will still be the highest they’ve been since 1975 and harder to source in 2023, while there’s a labour shortage with older, more experienced builders retiring and young ones coming on with much less expertise, as well as low migration,” Garrett says.
“With the lack of migrants, who would normally take up rentals in high-density areas, that part of the market will continue to be depressed, while there’ll still be a pandemic appetite for houses with gardens, and costs will still be high for renovators.”
On the upside, although prices continue to slide, few people now believe there’ll be a dramatic crash in the housing market.
Independent economist Harley Dale says the market is extremely fragmented now, with different demographics and home and mortgage owners in very different circumstances.
“But while we’ve seen falls of 5 per cent in some areas, 8 to 10 per cent in some, and others around 15 per cent, we’ve certainly seen nothing like the kind of crash some people were predicting,” Dale says.
“As well, there are a great number of householders who are ahead on their mortgage payments and who have a lot of equity in their homes and savings, so they can leverage that equity to stay ahead and spend money.”
Nothing’s going to be allowed to ruin our Christmas, either. We might see a rise in distressed sales in 2023 from people who are unable to service their debt, but most are getting ready to sit tight until better times arrive, says Real Estate Institute of NSW chief executive Tim McKibbin.
“And Australia had the highest consumer spending on record some weeks ago,” he says. “So, we’re getting ready to celebrate a great Christmas regardless.”
Williams, S. (2022, December 9). Can we expect a happier new year for the property market in 2023? https://www.domain.com.au/. https://www.domain.com.au/news/can-we-expect-a-happier-new-year-for-the-property-market-in-2023-1185451/