Property prices set to rise in 2023

PROPERTY prices set to rise moderately next year with regional differences in play.

There is a growing chorus of real estate analysts who are forecasting that residential property prices will rise in 2023 – and I am one of them.

In contrast to the predictions of economists working for the big banks and other institutions, specialist real estate researchers see prices growing in the year ahead.

No one is forecasting price rises like we saw in 2021, when the national average was an increase above 25 per cent.

Rather, most credible analysts are suggesting price growth that could be described as solid or moderate. That’s certainly how we see it at Hotspotting.

Experienced research professional Louis Christopher of SQM Research recently published his annual Boom and Bust report, in which he stated, as his base case scenario, house price rises in 2023 in all capital cities except Darwin.

As is always the case with the Housing Boom and Bust report, Louis Christopher presents a range of scenarios with different estimates of the impacts on property prices.

The four different scenarios assume particular outcomes with interest rates, inflation and unemployment.

Under his base case, the one he expects to happen, Mr Christopher roadly assumes that unemployment will not rise very high, that inflation will peak and then come down again, and that the Reserve Bank will stop lifting the official interest rate in the first half of 2023.

Under this base case, he is projecting moderate but solid price growth across Australia generally, with the capital city average being a rise of up to seven per cent.

According to Mr Christopher, Sydney will do best, with prices potentially rising by almost 10 per cent, with Perth next best with an increase of about eight per cent.

BY BRICKS & MORTAR MEDIA

TERRY RYDER HOTSPOTTING Managing Director BEN KINGSLEY PICA CHAIR Property Investors Council of Australia

In each case, he is expecting single-digit growth and at Hotspotting we think he’s being quite conservative in his forecasts.

Our view at Hotspotting is that most markets across Australia will deliver some level of price growth in 2023.

There will be regional differences, as is usually the case in real estate, but the general trend will be solid increases in prices.

The key national factors influencing markets will include The shortage of homes, relative to deman

The serious undersupply of rental properties

Ongoing growth in residential rentals

The return of overseas migrants and students with borders open

The increase in the migrant intake by the Federal Government

Ongoing strength in the Australian economy, with unemployment remaining low

The impetus from major infrastructure projects

The end of the cycle of rising interest rates

Those are some of the key national: actors – but ultimately real estate markets are local affairs, and some locations will outperform others.

In the new edition of the Rising Stars report published by Hotspotting in conjunction with the comparison site Canstar, we rank the 14 major market jurisdictions across in the nation based on a series of forward-looking indicators.

In the report, we rate the top four markets in terms of prospects in 2023 as Adelaide, Brisbane, Perth, and Regional Queensland. Other locations across Australia will also deliver price growth and generally there will be moderate to steady increases in most parts of the nation.

What is your overall view about how markets will perform in your specialty area in 2023?

There are two scenarios we need to consider, and they both have to do with market interventions in 2023.

Firstly – RBA and interest rates. If the cash rate stabilises at just above three per cent, and we don’t see rate rises from this point forward as inflation begins to ease – plus we see APRA reduce their servicing buffers back down to two per cent or 2.5 per cent allowing borrowers back into the market – then we’ll most likely see a stabilising of prices in more states than less, from the current declining markets we have now.

If the cash rate pushes to midthree per cent and even beyond, we will continue to see a very sluggish market, with further price corrections, even if APRA do adjust their buffer rate down.

If they don’t move the buffer rate at all in 2023, we are in for a tougher landing in the property sector than was really needed, and this will cause unnecessary pain on more households than needed.

What are some important sectors we should watch out for 2023?

Vacancy rates will remain at record low levels off the back of higher immigration. Flatmate sharing will increase as renters look for ways to reduce rental costs.

Continuing on from our correct prediction of last year, rents will continue on their upward trend as investors pass on the increased lending costs from higher mortgage repayments.

There is currently a housing undersupply due to our increasing population, but limited lending will see the undersupply of stock amplify in 2023.

Regional markets will come under selling pressure as the higher running costs of second lifestyle homes due to increased interest rates, as well as the relaxation of the pandemic health orders, potentially will see some of these properties become excess to need.