One of the leading property markets in the country has produced a study outlining what trends it sees occurring in the coming year, following many years of chaos not only in the property market but in the globe as a whole.
My, how a year can change things.
Domain’s Chief of Research and Economics, Dr. Nicola Powell, said that 2022 would go down in history as the year when the Australian real estate market shifted from a once-in-a-generation property boom to a slump.
“2021 was an unusual year when housing demand increased to an all-time high, house prices soared, supply shrank, financing rates reached rock bottom, and buyer preferences evolved,” stated Dr. Powell.
The result was an unsustainable price boom that made it difficult for purchasers to get a mortgage.
Domain research found that the most sought-after home configurations included four bedrooms and two bathrooms, two bedrooms, and one bathroom, or three bedrooms and two bathrooms.
East Doncaster Secondary College in Melbourne was the most sought-after location due to its desirable school catchment. Popular search terms included “pool,” “waterfront,” “beach,” and “view,” indicating that buyers were particularly interested in lifestyle amenities and desirable locales. The phrase “studies” also ranked high on the list of sought-after topics.
Five 2023 property developments to keep an eye on in Australia
Typically, recessions are both briefer and milder.
Dr. Powell first pointed out that the effects of economic developments and global impacts on consumer mood and, by extension, the real estate market are already being felt.
She added that the real estate market’s ups and downs are cyclical, and this was a timely reminder of that.
Domain looked at the property price cycles of the combined capital cities over the past 30 years and found that the upswings were longer and steeper than the downswings.
While real estate prices are expected to continue falling throughout 2023, it’s improbable that they’ll completely wipe out the rise witnessed in the post-pandemic years. This suggests that property acquisitions should be viewed as long-term investments, in which time concerns would be less pressing. She stressed the importance of spending enough time shopping.
In a property market with so many players, there are more chances to go up.
In 2023, according to Dr. Powell, a multi-speed market will become more apparent, with certain parts collapsing rapidly and others being more durable. This is because there is more than one real estate market in Australia.
Within a significant city, real estate of varying sorts and prices may be found in various markets. Dr. Powell remarked, “They act differently, moving at somewhat different times, speeds, and even orientations.”
Dr. Powell predicted this would close the historically significant price difference between homes and apartments that emerged during the current real estate bubble.
Upgraders will benefit from the market decline since “properties at the premium price range experience higher declines,” she said.
The level of interest rates is just one of several factors that might affect market prices.
Lots of things will act how quickly and how much prices drop. However, when and how fast interest rates are lowered will largely determine the severity of the slump.
Consumers were caught off guard by the increase in interest rates in 2022. Dr. Powell predicted that as consumers were accustomed to the new normal, they would prepare for the future, including a margin of safety in their budgets to account for future rate increases and a heightened awareness of their reduced access to credit.
“Mortgage holders will be put to the test in 2023 when the historically low fixed rates they locked in during 2021 begin to expire. Rate hikes have slowed significantly, and we may see them begin to decline again by the end of 2023. Several factors besides only interest rates influence housing prices.
The impact will depend on several variables, including tax policies, population and income growth, banking regulations, and the rate at which new home supply can meet rising demand.
The increased need for homes directly results from the recent uptick in immigration.
According to Dr. Powell, one of Australia’s biggest exports is the number of people who come here to study and work.
It went negative for the first time since World War II due to the epidemic, sending shockwaves across the rental market.
She stated, “The Australian government has raised its quota for the permanent Migration Program to fill the skills shortage gap as part of the budget, effectively the greatest immigration campaign ever for Australia.”
There will be a retaliatory effect as an inflow of immigrants from other countries increases competition for available housing. In the short term, this will increase pressure on the rental market, which is now skewed against landlords nationwide.
Strategic investors that look at the big picture and the fundamentals will benefit from the rising rents since they will increase the property’s value.
Location matters and commands a higher price.
Buyers are ready to pay a premium for a home in a desirable area.
Dr. Powell said that the epidemic caused one of the most significant changes in Australia’s way of life. To her mind, it should have lasting effects.
She explained that this experience had taught her the value of living close to her place of employment and her friends and family.
Because of this, we now need even more open areas to feel safe, relax, learn and play, exercise, and enjoy nature. The neighborhoods to keep an eye on are the ones that provide the highest standard of living, whether because of gentrification, the availability of a particular amenity, or both.
