Property market forecast for 2023. In this market insight, we take the opportunity to share our perspective on what the year ahead will look like in the Melbourne/Victorian residential property market.
What happened in 2022?
The property market in 2022 commenced the first half strongly, with many suburbs entering the million dollar median house prices. Buying activity continued with demand heavily outstripping supply. There were many underlining reasons for this, but the Melbourne market continued its upwards growth trends.
Entering into the second half of 2022, we witness unprecedented interest rates rises over consecutive months. With the Reserve Bank of Australia (RBA) seeing increased inflationary risks, the government took a strong stance to curb the rise at all costs. This caused the property market to cease its upwards growth as demand promptly dropped. Many buyers, including owner occupiers and investors took a back step to wait for interest rates to hit its new norm before purchasing. Property supply continued to drop which partially enabled the property market to hold its recent gains. Many areas in both metropolitan Melbourne and regional Victoria witness falling property prices.
Vacancy rates have however reduced to record lows. Many landlords saw their vacant properties rented out in weeks, days and even hours from listing. It is evident that property affordability remains the issue in the economy with rental yields increasing given interest rate rises and low property supply.
As we ended 2022, Victorian’s voted Dan Andrews into another four year term while the RBA indicated that they will closely monitor the retail sales during the Christmas period. There is a 50/50 chance, the RBA may implement another interest rate increase if the Christmas period adds further pressure to inflation. Once inflation has become sustainable, property buyers will be in a great position to understand their borrowing capacity and look to purchase in the near distant future.
The property market forecast for 2023
At Crest Property Investments, we have the privilege to oversee market trends, buyer activity and access various research tools to review both economic and property data.
As the state and federal government work towards recovering the economy from the wake of covid-19, the year 2022 showed both ups and downs. In 2023, we enter a new year where we anticipate an increased activity from property investors as opposed to first home buyers or owner occupiers. No one has a blue crystal ball as there is always unforeseen events that will arise, but here we outline some of the macro property trends expected in the year 2023.
1. Vacancy rates:
There will be a continues shortage of properties to lease. Property investors will be enticed with the fact renting a property will be easier than what has been seen in the last 7-10 years.
2. Immigration is increasing:
As the covid lockdowns continue to ease, we are already seeing people an increase in overseas travel. We believe Australian immigration will picking up early next year, with Melbourne being one of the likely sought after locations. This will increase the demand for housing in both buying and renting.
3. Shortfall in property supply:
This trend has been witnessed over the course of the last 12-18 months. With the cost of construction increasing and the cost of credit, developers have not been putting new properties to the market. In general economic, when supply outweighs demand, it places upward pressures on property prices.
4. Unemployment rates are low:
Unemployment is at historically low levels. This means many are earning a regular income. With wages growth, this will enhance further buying into 2023.
5. Household balance sheets:
No doubt, interest rate increases in the second half of 2022 has cause a number of cash flow problems for buyers. Many households also have good balance sheets, with adequate cash flow buffer. It is estimated that there are up to $250-$260 billion in aggregate savings nationally, most held within offset accounts.
6. Many borrowers are ahead on their mortgage repayments:
The CEO of the Commonwealth Bank (CBA), Mr Matt Comyn recently announced, three-quarters of their loans are approximately two years ahead of repayments. we understand not everyone is in this situation, but this demonstrates many households may want to enhance the wealth buy purchasing additional real estate in 2023.
7. Government stimulus packages:
The government, both state and federal have provided many incentives to encourage first-home buyers into the market. From 1 July 2022, 40,000 new places under the Federal Government’s Home Guarantee Scheme will become available to help Australians to buy their own home.
What to do next?
In the year of 2023, sensible and strategic planning will see you find some great investment value in the property market. Seeking professional advice is the key to your success. If you have developed adequate equity, this may be an incredible opportunity to enhance your wealth and taking the next step to reaching a successful retirement.
If you’d like to learn more about buying an investment property, please don’t hesitate to contact us. We would welcome the opportunity to help with your property purchase. Our YouTube channel and Market Insights also provide a wealth of information to assist you with many areas relating to property.
While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you want to learn more, please contact us. We welcome the opportunity to assist you.
January 2023
