Experts in the property market have shared their predictions for 2023, including their thoughts on when interest rates will level off, and housing markets will experience increased property values. The consensus among these professionals is that the Reserve Bank’s tightening cycle is drawing to a close and supply and demand in the medium-term will continue to be unbalanced.
Although there has been a recent decrease in buyer demand, many Australians are still interested in purchasing a home. Additionally, while there has been a decline in new listings for homes up for sale, the availability of residential properties throughout the country is still limited.
Property prices have been falling in the real estate market recently, and this trend is predicted to last the entire year. Despite this, home values are still significantly higher than before the onset of the Covid-19 pandemic.
According to Cameron Kusher, the Director of Economic Research at PropTrack, national property values have decreased by 4.51% since reaching their peak in March 2022. Kusher predicts that home prices will continue to fall, with values projected to drop by between 7% to 10% in 2023.
Despite the projected decrease, national property prices are still up by a considerable 34.7% from the beginning of the pandemic until the peak in March of last year. Kusher notes that even if prices fall at the upper end of the forecasted range, home values will still be an impressive 18% higher than they were prior to the pandemic.
Certain cities in Australia are expected to experience less severe declines in property prices compared to others, particularly secondary capitals. Senior economist at BIS Oxford Economics, Maree Kilroy, notes that the pace of home price falls has recently slowed down. Kilroy expects that property prices will continue to soften over the next few months due to the delayed impact of rate hikes on the market. However, she predicts that the price correction may be short-lived.
Kilroy forecasts that the bottom for national property prices will likely occur in the September quarter, with turnover beginning to improve soon after. However, she believes that some cities will recover earlier than others.
The recent decrease in property prices has been primarily driven by the Reserve Bank’s efforts to curb inflation through rapid interest rate hikes. According to Cameron Kusher, one or two further rate hikes of 25 basis points are expected. However, he notes that rates are likely to remain steady thereafter. Kusher also speculated that the RBA board could begin cutting the cash rate again in late 2023 or early 2024, which may ease the decline in property prices.
While some Australian cities may see a more moderate decline in property prices, the pace of the overall drop has slowed down, says economist Maree Kilroy. She expects prices to soften further due to the lagging impact of interest rate hikes. Nevertheless, Kilroy predicts that the market correction could be brief, with a likely bottoming-out in the September quarter, followed by a gradual upturn in turnover. Despite the expected further interest rate hikes, Cameron Kusher suggests that a lower peak and earlier-than-expected rate cuts could lessen the impact of the price drop.
Meanwhile, experts suggest that potential buyers and sellers should carefully consider their options in the current market. With prices still significantly higher than pre-pandemic levels, homeowners may find it an opportune time to sell. This means if you are thinking of selling your home, now is the time to spruce it up and make it more valuable. You do not have to spend a fortune; quickly browsing through the Aldi catalogue to get discounted ornaments or furnishings that’ll add to the overall ambiance will work well. A lick of paint on the walls will also make the home look fresh.
Overall, the 2023 real estate market may present a unique opportunity for buyers and sellers alike. On the other hand, prospective buyers may find some properties more affordable now, with interest rates expected to stabilise soon. It’s crucial to seek advice from real estate professionals who can offer insights on the best strategies to adopt in these uncertain times.
However, buyers should be cautious and do their due diligence before purchasing. With the possibility of further interest rate hikes and a fluctuating market, it’s important to assess one’s financial position and consider the long-term implications of a property purchase. On the other hand, sellers should also be mindful of the current market conditions and set realistic expectations regarding their property’s value.
What happens when there is a decline in property prices?
When there is a decline in property prices, it means the market value of homes and other real estate properties has decreased. This could happen for various reasons, such as a decrease in demand, an oversupply of properties, or changes in economic conditions, such as rising interest rates or a recession.
A decline in property prices can significantly impact various stakeholders in the real estate market. For homeowners, a decline in property prices can result in negative equity, where the outstanding mortgage is more than the current property value. This could make it challenging to sell the property or refinance the mortgage.
For buyers, a decline in property prices could present an opportunity to purchase property at a lower price. However, it’s important to be cautious and consider the long-term implications of a property purchase, as further price declines could occur.
For the wider economy, a decline in property prices could impact consumer confidence, as homeowners may feel less wealthy and be less inclined to spend. It could also affect the construction industry and related businesses, as lower property prices could decrease demand for new construction and home improvement projects.
Overall, a decline in property prices can have complex and far-reaching effects on the real estate market and the wider economy.
A glimpse into the future
Looking into the future is a challenging task when predicting the housing market. However, certain key indicators can show where our relationship with real estate is headed. One of these is the transfer of economic and social power from baby boomers to their descendants.
The main question is whether the changes in how and where people choose to live, such as residing in smaller homes closer to major city centres, are a deliberate decision or a result of issues like the widening wealth gap and housing affordability concerns faced by younger generations.
Is the trend of young individuals favouring apartment rentals over purchasing a family home in their desired inner suburbs simply a reflection of their lifestyle choices and the cafe culture, or is it a social commentary on the growing disparity between the wealthy and less fortunate?
This shift towards renting rather than owning results in a growing pool of tenants, particularly in expensive inner-city areas where buying property has become increasingly difficult. This growing wealth divide creates a social hierarchy, where higher-income individuals view real estate as a tradable, tax-effective commodity. At the same time, lower and middle-income households see it as an unrealistic dream.