What will happen to house prices in Australia in 2023?
The real estate market in 2023 is expected to be more balanced than in 2022, with prices rising at a slower rate and inventory increasing. This is due to the shift caused by the rise in interest rates last spring, which has caused home prices to fall and homes to linger on the market. Despite this, demand for homes remains high, making it a promising outlook for the industry.
Many believe Australia’s housing market could rise by up to a whopping 6-9 percent in 2023.
SQM Research's Housing Boom and Bust report predicts that if interest rates don't surpass 4% and start to decrease in the second half of 2023, then Australian property values will increase by 3-7%, with Sydney leading the recovery with a potential increase of up to 12%. However, if interest rates continue to rise and inflation keeps increasing, properties could decline in value by up to 6%.
According to CoreLogic, property prices in 2022 have dropped by an overall 5.3%, the steepest decline in 14 years. This was due to the RBA's fastest rate tightening cycle on record, which caused housing values to fall sharply after rising for the first four months of the year. Eliza Owen from CoreLogic suggested that housing prices could have reached their lowest point in 2023, but could be further affected by rising mortgage rates. She also highlighted the possibility of a recovery in buyer activity due to strong rental markets, improving affordability, and low unemployment levels.
Shane Oliver, the Chief Economist of AMP, believes that the interest rate hikes have been the biggest driver of the current slump in property prices, and he expects them to continue to fall until September 2023. He has also predicted that as mortgage rates increase, mortgage stress levels will also rise, and the gap between the actual house prices and 'affordable house price' estimates will widen. This is due to the decrease in the purchasing power of an average new buyer, estimated to have fallen by 27% since April.
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Data provided in this article is of a general nature and should not be construed as specific advice or relied upon in lieu of appropriate professional advice