Home Insights Six pressing issues for the property market in 2023 

Six pressing issues for the property market in 2023 

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After a strong housing market in 2020-21, 2022 will be a turbulent year for the housing market. Interest rates rose sharply, driving down prices and lower sales volumes.

It has been a challenging year for the housing market. Source: Getty Images.


While prices for properties for sale have fallen, rental prices have risen on the back of increased demand from emigration and fewer first-time homebuyers. The inadequate supply of rental inventory gives landlords room to raise rents.

What are the 6 most pressing issues in the housing market in 2023 as market conditions change rapidly?

When will interest rates stop rising?

After 11 years of falling interest rates, inflation finally returned in 2022 and interest rates rose sharply.

The RBA is raising interest rates monthly from May 2022 onwards. Source: Getty Images.


The cash rate was 0.1% at the beginning of May 2022 when the RBA decided to raise interest rates by 25 basis points. Between May 2022 and December 2022, official interest rates have increased by 300 basis points.

Heading into 2023, rates are expected to continue rising initially, but the RBA will likely pause rate hikes from February to May.

Studies show that it takes one to two years for interest rate changes to fully impact the market. With so many rate hikes in a short period of time, it is expected that we are nearing the end of the rate hike cycle, but the impact of previous rate hikes will continue into 2023.

Will real estate prices stop falling by the end of the year?

Given how quickly interest rates have risen and how much borrowing capacity has declined as a result, the decline in prices to date has been fairly modest.

Real estate prices will continue to fall throughout 2023. Source: Getty Images.


The price changes seen during the pandemic were among the strongest on record for real estate price gains.

Property prices are expected to continue to decline through 2023 on the back of additional interest rate hikes, further declines in borrowing capacity, and a slowdown in the overall economic environment.

If interest rates fall in 2023, the outlook for property prices will change. However, we believe that this is unlikely and that if interest rates do fall, it will likely happen at the end of the year.

Will buyer and seller confidence return to the market?

The Westpac-Melbourne Institute’s latest consumer sentiment index stands at 78 points, well below the 100 points where optimists and pessimists agree. Since interest rates started rising, consumer sentiment has been trending downward and remains at historically low levels.

This shows consumer concern, but consumer behavior has yet to reflect this.

With interest rates rising month by month and not knowing when this will end, consumer sentiment is low and weighing on seller and buyer confidence.

Interest rates are expected to stop rising in early 2023, but this is unlikely to translate into a significant recovery in sentiment. Buyers and sellers are given more certainty, but trading volumes are expected to start increasing.

Will other states follow NSW’s lead and give first home buyers the option to pay stamp duty and land tax?

In late 2022, the NSW government passed legislation allowing first-time homebuyers buying property under $1.5 million to choose between paying stamp duty up front or paying an annual land tax.

The NSW government has passed legislation to help first-time homebuyers buy property. Source: Getty Images.


The majority of buyers are expected to choose the land tax option. If you don’t keep it for more than 20 years, it will become cheaper. This is unlikely, as most first-time buyers have not purchased a forever home.

We don’t know how much activity this policy will generate as it’s still in its very early stages, but it will significantly reduce initial costs for first-time buyers and help them take home ownership faster. .

Although it is usually much cheaper for first-time homebuyers to rent than to pay off a mortgage, the policy could lead to an increase in real estate transactions. Other states are expected to consider similar policies, but it is likely that the policy will not be introduced outside of NSW until after 2024.

How much will rents rise next year?

Over the past year, strong demand and limited supply have led to a rapid rise in rents. The surge in demand is driven by lower first home buyer purchase volumes and a surge in migration, while the drop in supply is driven by lower investor purchases and an increase in investor sales.

We also see the strength of rental demand returning from the very popular rural areas early in the pandemic to the revitalized major cities.

In the exodus hotspots of Sydney and Melbourne, inner-city rents are either cheaper or only marginally higher than they were at the start of the pandemic.

Rents are expected to continue to rise significantly as demand for city center rentals is expected to rise further over the next year.

Will rental inventory increase significantly?

Continued supply shortages are expected to drive rents higher. Source: Getty Images.


A significant shift in rental supply is unlikely in 2023 as the share of new lending to investors continues to decline and rising interest rates have significantly reduced borrowers’ ability to access additional mortgages. It is considered low.

More construction-leasing projects are in the pipeline, and those already under construction are nearing completion. However, the inventory of construction rental projects, or of new construction sales projects purchased by investors, is insufficient to meet the recovery in rental demand from domestic sources and the continued rise in demand from diaspora. seems enough.

Unfortunately for renters, a continued supply shortage is expected to drive rents higher.

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