Where is the property market heading?

Where is the property market heading in 2023? 

The Australian property market is currently in a state of flux, with prices bouncing up and down across the country. Sydney and Melbourne, in particular, have seen enormous price growth over the past few years, with some suburbs reaching unaffordable levels for many home buyers. At the same time, other parts of Australia are still seeing prices that are affordable for a wide range of buyers. So what does this mean for the future of the Australian property markets?  

There are a few key factors that will likely have an impact on the market in the coming years. Firstly, wage growth has been relatively low in comparison to price growth in recent years. This means that many people are finding it harder to afford a home, especially if they are looking in Sydney or Melbourne. Secondly, inflation and the cost of living, in conjunciton with rising interest rates in both Australia and across the world, will likely have a negative impact on prices. ‍

‍Predictions for the Australian property market in 2023

Property markets across Australia have been buoyant in recent years, with prices hitting all-time highs. But what can we expect in 2023? Here are some predictions:  

1. The broader market will start to decline due to rising interest rates as mortgage affordability decreases and the pressures from the rising cost of living start to take hold. This will be particularly prevalent in areas where households have over-extended with credit, or those on lower incomes who have only just recently bought into the property market. Despite this, there will be shining lights in the gloom where there will still be price support and possible growth for quality assets.

2. Sydney and Melbourne will remain the most expensive cities, but prices will start to decline in these areas, perhaps more markedly than others.

3. Regional areas will become more popular for investors as rents increase and yields improve.

4. The housing affordability crisis will continue, with first-home buyers struggling to get a foothold in the market (see point 1).

5. Rent prices will also continue to rise steadily and significantly, putting pressure on tenants' budgets. This will be exacerbated by new policies, such as the coming changes to the Qld land tax laws, which will plunge a market already in rental crisis into a dire position for most tenants. The fact that interest rates are going up also means that tenants who had plans to buy will have to stay put, putting further pressure on an already diminished rental supply.

6. It is possible that the RBA will overshoot the mark and have to rethink some of the rate rises that will have been implemented. There is a fine balance between not creating recessionary conditions whilst targeting inflation, and protecting the integrity of the Australian dollar to ensure the cost of imports does not increase even further. This is a world-wide phenomenon so there is a lot at play with plenty of moving pieces.

‍How can I protect myself? 

There are a few things that you can do to protect yourself against rising interest rates in 2023. Firstly, make sure that you are not over extending yourself financially - ask yourself the question "Do I really need this?" before you pull the trigger on a discretionary purchase. Not only will this help you directly, but it will also inherently lower inflation and reduce the possibility of rate rises. Of course, too much of it collectively, and we could see a recession!

Second, refinance your mortgage at a lower interest rate where possible (lenders compete heavily for new business) and if you have any credit card debt, try to pay it off as quickly as possible. 

Thirdly, keep an eye on the news and economic indicators, so that you can adjust your investment plans as needed and consult with a financial advisor to get more personalised advice. People often read sensationalist headlines and base significant financial decisions from these, which is mind blowing! Of course, if you'd like to discuss your property plans, please get in touch!

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