- Stamp duty changes will boost the amount of first homes buyers entering the NSW market.
- The biggest effects of interest rate rises have been felt in the three largest capitals.
- Adelaide is proving to be quite resilient and holding firm at the moment.
The property market has finally reached the culmination of it’s peak and is starting a downswing. So, while obstacles such as tighter borrowing restrictions, higher interest rates and fewer first home buyer grants saw first home buyer numbers plummeting by 31 per cent to November 2022 according to the Australian Bureau of Statistics, 2023 may yet see their tentative return.
Managing director of Sydney buyers’ agency Aus Property Professionals Lloyd Edge confirms: “At the moment we are in a buyer’s market and I see it being this way for at least the first six months of 2023.”
Edge says the eight consecutive interest rate increases in 2022, had the effect of levelling the market out. The increases also reduced the amount of money potential buyers can borrow and spend at auction.
He says, “I believe the Reserve Bank of Australia needs to watch the effect of those eight rises before taking more action as there is always a lag effect. I would only expect perhaps one or two more interest rate rises, if that, at this stage.”
First home buyers to step onto ladder
The First Home Buyer Choice scheme, announced last year, commenced on January 16 in New South Wales.
It gives first-home buyers the choice of opting into an annual payment of $400 plus 0.3 per cent of the land value when they purchase a property instead of paying a lump sum as stamp duty.
Edge comments: “The land tax and stamp duty changes which came into effect this month which will boost the amount of first homes buyers entering the market, because if they choose the yearly land tax it will be a considerable saving on the regular upfront stamp duty for them.”
So, where can first home buyers and first time investors get a foothold on the property ladder in 2023?
What’s hot in the cities?
Edge points out that the biggest effects of interest rate rises have been felt in the three largest capitals, being Sydney, Melbourne and Brisbane where prices have fallen as a result of rising interest rates.
“However, Adelaide is proving to be quite resilient and holding firm at the moment. Regionally in South Australia, there are good locations for those looking for greater yields at a cheaper price point. Mount Gambier is one to consider” he said.
Typically, Perth is a boom-and-bust market and not top of the list for investors. But Edge says things are looking good for buyers in the Western Australian capital.
He advises: “There is a fair bit of growth potential in the Perth market, given the medium house price of only $540,000. It also has the highest yields out of any capital in the country, so investors are starting to flock to Perth to buy and this bucks the trend of any forecasted housing crash.”
Regional Market gems
“But let’s not forget about the regional markets,” said Edge, a huge fan of investing in markets other than the urban areas where most Australian’s live, as outlined in his two bestselling books Buy Now and Positively Geared.
Northern Territory
“Darwin has the highest yields in the country where you can get yields of up to eight per cent, which really mitigates against interest rate increases.
Queensland
Edge recommends looking at Southeast Queensland for some good growth areas: “Another market with some of the highest yields is Bundaberg in Southeast Queensland where I have been buying a bit lately.
“Bundaberg is still a market seeing growth despite the current climate and you can get positively geared properties there.
“Bargara, a coastal community 15 minutes from Bundaberg is definitely one to watch. The price point and yields in Cairns are bucking the trends. There is certainly value there” he says.
New South Wales
“There are good opportunities in Albury/Wodonga on the NSW and Victorian border. This region saw some years of growth during the pandemic, so the markets have come back a bit and there are some good buying opportunities now” says Edge.
What’s to come?
Prospective home buyers should not get too comfortable and wait around, as the property clock is always ticking somewhere. “For the capital city and major city markets that have leveled out, I believe growth will begin to occur again and the next cycle will start towards the end of this year”
“Some prices are also falling, and fewer buyers around means that you can negotiate a bit more with the vendors.” Edge says.
