Melbourne houses
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  • 2022 was a year where we moved to the "new normal"
  • We saw eight interest rate rises in 2022, bringing the cash rate up from a historic low of 0.10% to 3.10% by the end of the year
  • In Perth, people returned to the office taking office occupancy levels to 80% of pre-Covid levels

2022 has been another exciting year in real estate, global economics, and politics.

February saw the invasion of Ukraine by Russia, a war that has now been waged for some ten months and is likely to continue through to the new year.

We voted for our first Italian-Australian Prime Minister this year, as Anthony Albanese became the 31st Prime Minister of Australia.

We bade farewell to the Queen, and saw Number 10’s revolving door unceremoniously spit out Liz Truss, Britain’s shortest-serving prime minister since George Canning passed in office; former US President Donald Trump has also announced he will be running for the White House in 2024.

In 2022 society moved towards a new normal around the globe. We have shifted to the near post-Covid world where many are learning to “live with Covid”, likely moving towards what may be called the endemic stage of Covid. Most of the population got vaccinated, and we started travelling again.

In Perth, office occupancy hit 80% of pre-pandemic levels.

The Reserve Bank of Australia (RBA) announced increases to the interest rates eight times this year, bringing the cash rate from a historical low of 0.10% in April to 3.10% in December 2022.

What’s next for property in 2023?

The Property Tribune reached out to several leading experts in their field and asked them to share their predictions for the new year, including Brett Richardson, Hayden Groves, Prash Nayar, Cath Hart, and Joseph Rapanro.

It comes as no surprise that interest rates are front of mind, with the ongoing impacts of sharp and ongoing interest rises making market murmurs.

The strength of Perth’s market continues to outshine most of the other state capitals, but while there should be more stock coming online across next year for both sales and rentals, it will still be choppy waters for quite a few more months.

2023 is the year of refinancing

Loan Market Ellenbrook’s Brett Richardson said he expects interest rates to continue rising into the new year, with economists divided on how much more the cash rate will rise.

“We will get at least one month of respite as the Reserve Bank Board do not meet in January. Economists are divided on how much more they will increase, with some saying they will increase only once and others saying a maximum of four more increases are to be expected.

Brett Richardson, Loan Market Ellenbrook

“[For context,] in 2012 the cash rate increased to 4.25%, with [the cash rate] possibly increasing to 4.10% by June 2023 if we get 4 more increases.  The other trend will be the low fixed rates that will start to expire in March 2023 which will impact mortgage holders reverting to a variable rate with some repayments increasing by up to 40%.”

2023 will be the “year of refinancing”, Mr Richardson next year “… will see mortgage holders looking to refinance to a lower variable rate or will consider fixing for certainty. Households will need to direct more money towards mortgage repayments and have less disposable income.”

Mr Richardson believes 2023 will be challenging and gave feedback on how rental prices, sale prices, costs of living, and interest rates will interact.

Brett Richardson. Image: Loan Market Ellenbrook.

“With the higher cost of living and mortgage repayments continuing to increase in 2023, inflation will continue to be higher. This could see mortgage stress, with property prices possibly declining.

“We should expect a slowdown in the economy with housing prices remaining down, unemployment to stay low and wages expected to increase but unlikely to keep up with the cost of living.

“With the rental market at record-low vacancy rates, rents will continue to increase, with landlords passing on interest rate increases to their tenants.”

Industry leader expects slower property market in 2023, with Perth to shine when rate rises stop

The President of the Real Estate Institute of Australia (REIA), Hayden Groves, also expects a slower market across the nation in the first half of 2023, however, Mr Groves foresees an uplifting reaction of the residential property market in Perth once the interest rate increases stop, with Perth remaining the most affordable capital in Australia.

“Perth’s property market is set to stand out as 2023 unfolds,” he said.

“Property growth rates have been more subdued than east coast cities, which are now in retreat.”

“Perth’s market continues to hold with migration rates increasing, piling pressure on demand, the best rental yields in the nation and being the most affordable major capital, there’s more upside than downsides expected in 2023.”
Hayden Groves, REIA President
Hayden Groves REIA
Hayden Groves. Image: REIA.

“Once interest rates rises begin to moderate as expected in the back half of 2023, Perth could have a significant run off the back of our relative affordability and a strong economy.”

Perth property to get positive start in 2023

Senior Sales Associate of Perth Realty and fellow contributor Prash Nayar agrees with Mr Groves.

“There still seems to be no signs of a slowdown with consistent weekly sales (1010 sales) and lower than the average number of residences on the market (8692 residences based on REIWA statistics as of 28th of November),” Mr Nayar tells The Property Tribune.

“Post-COVID, confidence in the WA market in all sectors have seen a significant rise, with our state being hailed as a safe haven. Our rental prices have been increasing since our borders reopened in March 2022 and have not shown any signs of shifting directions.”

Left to right: Wouter Jellema, Prash Nayar. Image: Wouter Jellema.

When looking forward to the next 12 months, Mr Nayar foresees a positive start to 2023:

“My prediction is that in the first quarter of 2023, the market will continue to show strength. However, just as some suburbs in Perth are showing a slight reduction in prices, the same will occur across more suburbs as first-home buyers react to the rate hikes. Property sales will continue to see consistent numbers until supply matches that of 2014/2015 where the average number of homes on the market was sitting at 12,000 – 13,000 homes.” said Mr Nayar.

Rentals remain challenging, but there is light at the end of the tunnel

REIWA CEO, Cath Hart, echoed the positive message, telling The Property Tribune she expects listings to begin increasing:

“Sales remained strong in Perth in 2022, with the average weekly sales reported by REIWA members sitting at 895 – up just 2.87 per cent from 870 in 2021. We anticipate sales volumes to remain at about this level in 2023. As building completions increase over the next 12-18 months, we anticipate listings will start to increase. However, they will remain below historic averages. The low supply and strong demand will remain relatively steady for WA house prices over the coming 12 months.” Ms Hart explained.

Left to right: Cath Hart, Wouter Jellema. Image: Wouter Jellema.

On the other hand, the rental market has been challenging for tenants, who have witnessed a shift from a tenant market to a landlord market as many investors left the industry. There is light at the end of the tunnel though, with investors eager to enter the market:

“For tenants, 2022 was another challenging year. Rental listings remained at near-record lows, the vacancy rate dropped to 0.7 per cent, and the median weekly rent was $500 in November, which was $60 higher than a year ago, Ms Hart explained.

“After seeing investors leaving the market in the past two years, with more than 18,000 fewer rentals since the peak in January 2021, we are starting to see increased investor activity, particularly from Eastern States investors. This is a positive sign regarding boosting rental stock levels. Rental listings will remain low in the medium term but are expected to improve over the next 12-18 months as building completions, and investor activity will increase,” Ms Hart predicts.

“Positive net migration will maintain demand in the market, and we anticipate further increases to the median rent price in 2023.”

What to expect in Commercial Real Estate?

Managing Director of SVN Perth, Joseph Rapanaro, foresees a flattening increase, if not a decline, after some solid growth we have seen this year with industrial properties.

“After 12 months of solid growth in industrial rental rates, I expect a flattening will occur in 2023 and 2024 with little increases, if at all. Yields have already started to soften and will continue to do so next year, particularly in the first half,” said Mr Rapanaro.

Joseph Rapanaro. Image: SVN.

When reviewing the retail market, Mr Rapanaro sees a strong relationship between the costs of living and retail tenancies.

“Retail demand will soften as interest rates start to bite into people’s discretionary spending, leading to store closures, increasing the vacancy rate and eventually softening rental rates.”

Mr Rapanaro also believes that the office markets are about to face a challenging period, even though we have seen more returns to our offices since Covid-19 compared to other markets in the country.

“Whilst there has been an uptick in demand in the past six months, the economy heading to a period of nil or negative growth will result in less demand in both city and suburban markets.”

Ms Hart believes that business owners will continue to react to the “new normal” and find solutions to keep promoting the office environment to staff and clients.

“Business owners will continue to seek quality office space with an ambience that will encourage staff to work from the office rather than remotely.”


Disclosure: This article contains quotes from SVN, the employer of Wouter Jellema.

* Brett Richardson’s insights referenced information from industry body Mortgage and Finance Association of Australia (MFAA).

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