Australian Property Market: 2023 Forecast

February 8, 2023
Property Rental Myths in Adelaide

Key takeaways:

  • Rising interest rates from May 2022 decreased housing affordability.
  • Experts are speculating an increase of interest rates to 4% in 2023.
  • Rental markets will remain strong, with more immigration and more renters on the market.

In 2022, Australia suffered a major hit as mortgages increased faster than expected. It had risen eight times higher, which ended at 3.1% before the year closed. What does the Australian property market hold this year, and will this aggressive change affect buyers’ confidence?

When a mortgage rate increases, the monthly payment increases, even if the loan amount remains the same, leading to a higher cost of living. This makes it more difficult to purchase a new home than before.

Now, you have to pay an almost extra $900 every month for a $500,000 mortgage and $2,500 for someone with a $1,500,000 mortgage. That’s the effect of the aggressive mortgage hike implemented by the Reserve Bank of Australia (RBA) last 2022.

Increasing mortgage rates can have numerous effects on the overall real estate industry. As an Aussie, what’s in it for 2023? Here are the trends in the property market that can affect your decision when buying a house:

Recommended Reading: Buyer or Seller Market? What’s the difference and what kind of market are we experiencing right now?

1. Possibility Of Another Mortgage Hike

Will mortgage rates increase to 4% by the end of 2023?

This is what most people ask these days, especially those planning to buy a house. Why? Because the possibility of another mortgage hike can affect their buying decision.

If experts forecast another aggressive mortgage increase, house hunters can decide whether to: 

  • Hold their breath and wait for the soaring living costs to ease a little, or
  • Purchase a property as soon as possible before the forecasted hike.

Experts believe that mortgage rates will continue to increase in 2023, but not as severely as they did last 2022. And they don’t expect rate hikes to be as many as the previous year. Yet it’s still an important factor to consider by consumers and businesses.

Experts believe the RBA will take a break before mortgage rates reach a whopping 4% as well.

Suggested Reading: Median House Prices in Australia in the Last 50 Years and What Will Predicted House Prices in 2030 Australia Look Like?

2. The Rental Industry Will Continue To Boom

How to Deal With Difficult RoommatesAustralian property market

Experts expect the rental market to flourish by the end of the year. This is because of the aggressive mortgage surge last 2022 and the possibility of another one in 2023. Such scenarios have encouraged homeowners to rent for a while.

This has provoked a rental crisis in Sydney and other capital cities because of the lack of affordability and combined with the housing shortage in Australia.

Nonetheless, the high demand for rental houses has caused the value of these properties to increase up to 14%. Despite that, house hunters still prefer renting properties because they’re more affordable than purchasing new ones due to soaring mortgage rates.

Still, experts hope that more of these renters will become the first buyers to help bring back the balance in the Australian property market. 

Recommended Reading: A Look Back at Australian House Prices History

3. More Will Invest In The Property Market In 2023

Despite the high mortgage rates, first time homeowners will probably invest in the property market in 2023. This is because of the incentives they can claim as soon as possible, including:

First Home Owner Grant (FHOG) 

The government offers financial assistance to first time homeowners in the form of first home home owner schemes and grants, encouraging them to purchase or establish a new residential property. Nevertheless, the amount of grant and its conditions may vary from state to state

For example, Victoria offers an FHOG worth AUD$10,000, while Tasmania provides first homeowners with AUD$20,000. Keep in mind that the amount of the grant may vary every year. For more information, visit your state’s revenue office website. 

Beyond the Basics: Don’t settle for ballpark figures. Dive into accurate and current data on how much houses cost in Australia to make well-informed decisions.

Savings On Stamp Duty

The territory and state government charge tax for new property purchases. This tax isn’t limited to residential properties alone; it may include cars, car registrations transfer, and other valuable items. This tax is known as ‘stamp duty.’

First home buyers can be exempted from paying stamp duty. For example, in Victoria, you may be eligible for stamp duty exemption if the property you purchase is worth AUD$600,000 or less. If it’s AUD$750,000 and above, you won’t be qualified, but your tax will be tapered.

Once the first home buyers have entered the property market, investors are likely to follow. The growing rental market and rental yields can be enticing and lucrative enough to encourage them to return to the market.

Suggested Reading: When Was the Last Housing Market Crash in Australia?

4. Mortgage Rates Won’t Be The Only One Affecting Property Value

Australian property market

Experts believe the Australian property market had gone soft before the aggressive RBA rate hike in May 2022. This is because many buyers were already struggling to keep pace with the soaring prices of residential properties. 

Now, buyers have acclimated to the new norm. They’re now planning for further mortgage hikes and being more mindful when it comes to their borrowing capacity.

Aside from mortgage increases, buyers have to consider the following factors influencing the prices of residential properties. These include income growth, population, tax settings, regulations, and housing supply responsiveness. 

Still, mortgage rates will be at the top of most consumers’ minds. After all, a simple hike can significantly affect your decision-making process.

Gain more knowledge: Is Australia in a Housing Bubble in 2023?

5. An Influx Of Immigrants Will Improve Housing Demand

After the reopening of Australia’s borders, demand from incoming immigrants has increased the pressure on the property market, particularly the rental market. 

Experts have seen the influx of overseas migration adding demand to Australia’s housing market. This has been made possible by the government’s permanent migration program, which aims to improve the shortage of skilled personnel.

6. Expect Buyers To Pay Extra For More ‘Liveable’ Houses

Australian property market

Experts believe that ‘liveability’ will be a crucial trend in 2023. This is due to the influx of employees transitioning from traditional office setups to work-from-home—a wave that changed many Aussies’ lives.

It gives the housing market a chance to grow despite the challenges of increasing mortgage rates. Nonetheless, the rental market is no exemption. This is especially true since many Aussies find it more affordable than purchasing or building a new house.

Final Words on the Australian Property Market in 2023

If you’re looking for your next home, Soho can help you find it. Browse our search page to check out some amazing listings available right now.

But don’t just stop there, download our app to get access to more features. Just remember to shortlist or swipe left on our listings so we can send you others that better match what you’re looking for.

The coming year might be a challenging year for the real estate industry. Bigger changes may affect both buyers and sellers, especially regarding increasing mortgage rates. Nonetheless, don’t let such changes scare you. Instead, use it to your advantage to look for the right opportunity to purchase or rent a house, whatever suits your needs and budget.

Soho is your expert team in Australian real estate, offering an innovative platform for effortless property searches. With deep insights into buying, renting, and market trends, we guide you to make informed decisions, whether it's your first home or exploring new suburbs.
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