If you’re like most Australians, you’re probably wondering what the property market is going to do in 2023 and over the next few years. Is there an end to the RBA cash rate hike?Will prices keep going up? Will they crash?
While we don’t have the definite answers to these questions, we will share with you perspectives and outlooks most commonly shared by the industry experts. Let us take a look at the Australian property market outlook for 2023 based on the real estate market trends we saw in 2022.
More RBA cash rate hikes
It is a fact that the Australian property market is in a downturn. This can be attributed to the rising interest rates which, in turn, was caused by the successive RBA cash rate hikes. At the time of this writing, the official cash rate has been raised seven times in seven months — the latest increase was by 25 basis points.
The Reserve Bank of Australia, who is the governing body behind cash rates, has done something similar to this in the 1990s in response to very high levels of inflation. It is safe to expect more RBA cash rate hikes as the institution continues its efforts to control the inflation — possibly slowing to 4.7% over 2023.
But, experts say that we are getting closer to the terminal cash rate target for this property cycle.
More house price decrease
Year after year we hear doom and gloom predictions on an inevitable property market crash, but no such thing has happened in recent memory as of yet. Instead, experts forecast a slow and steady decline in house prices across the country.
The four major banks in the country (ANZ, Westpac, NAB, Commonwealth Bank) all predict that house prices are going to significantly decrease between 10% to 15%, some of this has already occured. These numbers are heavily skewed towards the Sydney and Melbourne markets who had significant growth prior ot the COVID-19 boom.
Because borrowers are assessed at higher interest rates and living costs, their borrowing capacity becomes lower. This effectively will bring house prices back down because of the surplus brought about by people having less to spend (i.e., law of supply and demand).
More property demand
While many project more property price fall, many also expect the demand for property to grow especially when the price hits bottom. The decline in price in only short-term, and real estate is a long-term game.
Eventually, consumer confidence and borrowing capacity will jump back up as we reach the terminal cash rate target and inflation surges come to a halt. Tenants might upgrade to better rentals, homeowners might upgrade to bigger and better homes, and baby boomers might move out of their old family homes and into family-friendly townhouses.
Consumer sentiment shifts play a big role in the world of property. As such, emotions that ran high during the short property boom like (i.e., FOMO or fear of missing out) will be prominent again in the Australian property market.
Other factors that might contribute to more property demand are the return of immigration (interstate and international), falling unemployment, and rising wages and exports —all signs of an economy in recovery.
Continued rise in rent prices, more investors
Australia is in a rental housing crisis. The increased rental demand happening simultaneously with low vacancy rates have caused a tremendous spike in rentals and a massive displacement among renters.
There is an expected influx of interstate migration, with many Australians putting premium on good neighbourhoods, close proximity to CBDs, safety, and more affordable housing.
An increase in overseas immigrants (e.g., foreign students renting close to their nominated universities and CBDs, skilled workers from abroad being continuously outsourced to address the labour shortage) is also to be expected, with the government bringing back its immigration target back to its annual cap of 190,000.
The increased population will keep increasing the demand for rental housing, and this puts pressure on housing markets to accommodate this demographic.
As such, more and more property investors are going to jump on this opportunity to invest in rental properties. Increased construction activities and infrastructure may well be underway, especially since Australia will be hosting the 2032 Olympics which is already expected to bring in many long-term benefits for the country — particularly in Brisbane, the host city.
What’s the next move? Seek a broker for guidance
To conclude, it’s not all bad for 2023 in the real estate market. We are currently in the adjustment phase of the property cycle, and a property market crash is not something we should be concerned about.
If you are ready to take your next step but not exactly sure what it is, don’t hesitate to get in touch with a broker. They can help guide you through the murky waters of the property market and give you some insights into what may be in store for 2023.
The team at Professional Lending Solutions is always happy to help our clients make informed decisions about their finances. Give us a call today on 0421 934 033 or click the button below to get in touch with our mortgage brokers.
Phil’s journey from banking to mortgage brokering reflects a career driven by a commitment to personalised service and tailored financial solutions. With a distinguished background in banking, including roles at NAB, ANZ and Lloyds TSB Bank in the UK, Phil spent 12 years developing expertise in personal and commercial finance, while also completing a Bachelor of Business (Finance), followed by an MBA majoring in International Business.