- Although the property market is generally in a decline, there are some good opportunities
- Unlikely interest rates will go lower for at least the first half of 2023
- Darwin has the highest rental yields of the capital cities
Without a doubt, 2022 has been a turbulent year for the Australian property market.
With a succession of interest rate rises, many homeowners came under mortgage stress, and many first-home buyers were priced out of the market due to unaffordable repayments.
Now, with 2023 just a couple of weeks away, many are pondering what 2023 will hold for the Australian property market. Will it be stable, or will it be just as turbulent as this year?
To help answer, property expert Lloyd Edge, author of Buy Now and Positively Geared, has shared his thoughts for those thinking about entering the market in 2023.
While the property market is generally in decline, Mr Edge believes it is important to remain calm and have an open mind about the best growth opportunities.
“The big four banks have all predicted that house prices will take a dramatic tumble in 2023 with many experts predicting the falls to be double digits,” he said.
“But, when looking at the property markets on a more macro level, you will start to see what is really going on.”
“Most importantly, try to keep things in perspective. Whilst the big picture is that overall, the Australian property market is in a downturn, this does not mean that all the nation’s property markets are being impacted equally. Some markets are being hit stronger than others whilst some markets are even seeing strong growth.”
What will happen to the Australian real estate market in 2023?
For those thinking about taking the plunge into the Australian real estate market next year, Mr Edge answered typically asked questions and shared his predictions for 2023.
What will happen with interest rates?
Unfortunately, Mr Edge expects interest rates to remain high for at least the first six months of 2023 while the central bank curbs inflation.
“With less competition buyers will continue to have the advantage in negotiations with vendors and real estate agents,” he said.
“For people that have their finances in order and are ready to buy, the next few months is a good time to secure a bargain and get better value for your money.”
Mr Edge noted that there is speculation that the Reserve Bank of Australia (RBA) will bring the cash rate down to below 3% in 2024.
“(This) is when we will see the current buyer’s market starting its pivot into a seller’s market and this is when we will start to see high clearance rates, competitive auctions, and rising property prices across the capital cities,” he added.
“Property will always move in cycles, but remember that property is a long-term gain, and you just need to ride out the waves for the long term.”
Where will house prices end by the end of 2023?
According to the most recent housing report from ANZ, capital city property prices are set to fall over 2022-23, before climbing at a more modest rate of 5% in late 2024.
Mr Edge noted that is higher than what the RBA predicted; an 11% national house price drop by the end of 2023. Nonetheless, this sort of advice should be taken with a grain of salt, he argued.
“The ‘experts’ at Commonwealth Bank predicted 20% plus price falls in the Australian Property Market during the pandemic, however, we actually experienced price increases in many markets across the country,” he said.
Regional or metro property?
It is expected that the metro property markets will continue to see a downturn during the first three-to-six months of 2023, especially across Sydney, Melbourne and Brisbane. However, Perth is full of good opportunities thanks to its lower median price point, and some growth is still being seen.
Mr Edge noted that for investors prioritising cash flow, Darwin is home to some of the highest rental yields in Australia, around 7% to 7.5% on average in some suburbs.
“There’s also set to be an increase in government spending in the NT, meaning that Darwin properties could get a short-term boost from the new infrastructure projects,” he said.
“On the other hand, we’re still seeing steady growth in regional areas, although it’s slowed down compared to the pandemic property boom. Investors are driving this demand due to the lower median price points and high rental yields of regional properties. There are also people still looking for a “sea change” lifestyle shift by moving to a regional area.”
“At the end of the day, both metro and regional properties make great investments and can deliver strong return on investment. Where you choose to invest will all come down to strategy, opportunity, and budget.”
What are the best locations to invest in?
As mentioned before, Darwin has the highest rental yields for both houses and units, with the suburbs of Gray and Woodroffe recording rental yields of 7.5% and 7.1% respectively.
Outside of the NT, regional Victoria suburbs such as Highton 9in Geelong) and Sebastopol (near Ballarat) have strong potential thanks to increased government spending on new infrastructure.
“Based on five years of sales, Sebastopol has seen a compound growth rate of 19.2% for houses and 16.7% for units. Wangaratta, a city in Victoria’s northeast, is also a place where investors might be able to buy an older property for a lower price point and increase equity through renovation,” noted Mr Edge.
“Gunnedah, in regional northeast NSW, is showing signs of experiencing similar growth as Armidale and Tamworth. In Sydney, most areas are in decline or plateauing, however the St. George area still has many good opportunities for investors and first home buyers.
“Suburbs like Bexley, Kogarah and Rockdale are conveniently located close to Sydney airport, and there’s public transport that takes you directly to Sydney’s CBD in under 30 minutes. Suburbs in the Sutherland Shire, such as Gymea Cronulla and Miranda, and the Hills District, including Kellyville and Baulkham Hills, are family orientated and will experience some growth over the next few years.
“Maroubra and Kensington are also desirable locations due to lifestyle factors and are set to boom in the next growth phase.”
