Foreword

Market conditions remain soft with the combined impacts of higher interest rates, inflation and cost of living pressures driving consumer and buyer sentiment lower.

The most recent interest rate increase, on 7 February 2023, took the cash rate to 3.35% and was the ninth successive increase by the Reserve Bank of Australia (RBA).

There is debate on how many more rate increases will follow with a range of factors at play.

A key factor is the delay in the impact of monetary policy. It takes time for the full impact of higher interest rates to flow through to the economy.

Another factor is the sizeable share of existing fixed-rate loans which are expected to roll over into significantly higher variable rates in 2023.

Some commentators suggest the RBA might pause, at some stage in the coming months, to assess the impact of the interest rate decisions to date.

Overall, however, it appears likely that the RBA will raise interest rates further.

This will result in higher repayments for many households and place further cost of living pressures which will slow demand.

Residential land markets have, so far, adjusted to higher interest rates mostly through sale volumes.

Volumes continue to decline from recent highs and are expected to remain at below-long-term average levels over the immediate and short-term.

Gross land prices have remained relatively resilient to date.

However, rebates and incentives are emerging and we expect will be increasingly used over the short to medium term.

We expect overall market activity to remain soft over the coming months as the impact of higher interest rates flows through.

While the immediate and short-term outlook remains challenging, the medium to long term outlook, for the residential land and broader property markets, remains robust being underpinned by continued improvements in property market fundamentals and steady economic and employment growth.

Population growth is rapidly rebounding driven by the return of overseas migrants.

Overseas migration is now trending around prepandemic levels and permanent arrivals recently reached a new high.

Overseas migration is forecast to increase to a net inflow of 235,000 from 2022–23 and remain at around that level (Source: Centre for Population 2022, 2022 Centre for Population Statement, The Australian Government, Canberra.).

Vacancy rates remain at near record lows with some markets estimated to have reached record lows.

Going forward, various measures of dwelling supply continue to point to major challenges in delivering the required number of dwellings.

Residential building completions and commencements continue to decline.

We consider that housing shortages in key metropolitan and regional markets remain significant and are likely to continue increasing.

Higher interest rates and inflation will challenge the outlook for the Australian and global economies in 2023.

However, to date, Australia’s economy and labour market have remained resilient overall.

The national unemployment rate remains at around half century lows.

Employment growth also remains steady.

The latest Quarterly Market Insights (QMI) report examines the key indicators we follow to anticipate market trends and assess the outlook. We analyse what the market has done in the past, what is happening now and where the market is headed.

Importantly, the QMI report presents our own proprietary market intelligence, collected and analysed by our in-house research team. Our proprietary market intelligence and research provides the latest trends to our clients, stakeholders and strategic partners and empowers them to anticipate the future and make strategic decisions.

It’s all part of our commitment to providing leading market insights, forecasts and in-depth analysis of the Australian residential property market.