Property prices took a hit in the second half of this year and they’re expected to fall further, according to Domain’s annual End of Year Wrap report.
In fact, Domain broke down the top five biggest property predictions for next year, including where opportunities might lie.
Here’s what home owners and potential buyers should be keeping an eye on in 2023.
1. Price falls will be shorter and less severe
As we move to 2023, Domain’s report reminded buyers and sellers of the cyclical nature of the property market and that property should be viewed as a long-term investment.
“With interest rates rising and property prices falling, it can understandably make homeowners feel uncertain about their property journey,” the report said
“However, while property prices will continue to soften in 2023, it is unlikely they will erase all the growth seen during the pandemic boom.”
2. Multi-speed property markets will create opportunities for upgraders
Domain said a multi-speed market would become more apparent in 2023, with some areas falling faster while others would be more resilient.
“Overall, entry-priced houses and units will hold firmer, particularly in the most expensive capital cities - Sydney and Melbourne,” it said.
“This will be driven by the affordability barriers of purchasing, first-home incentives and deteriorating borrowing capacity steering demand to more affordable options. This, coupled with the houses at the premium price point seeing greater falls, will create opportunities for upgraders.”
3. Interest rates aren’t the only factor affecting housing prices
While interest rates will play a major role in property prices, Domain said tax settings, banking regulation, population and income growth, and new housing supply would all have an impact.
Domain chief of research and economics Nicola Powell said rate hikes were a huge shock to potential buyers but many were adjusting to the “new norm” and were more mindful of their lower borrowing capacity.
“With the wave of fixed-rate expiry in 2023, we will start to see the true impact of interest rate increases on consumer spending as more Australians tighten their belts to cover the step-up in repayments over the last seven months,” Powell said.
4. Return of international immigration will increase housing demand
With the opening of international borders in early 2022, the country’s major capitals welcomed back many skilled immigrants and overseas students, which meant more people needing to find a home.
“This influx of people arriving from overseas will add incredible demand to Australia’s housing market,” the Domain report said.
“Initially, this will place a further strain on the rental market but continued rising rents will also make purchasing more attractive for strategic investors.”
5. Buyers will be willing to pay for the right neighbourhood
Domain analysed keyword searches and found lifestyle additions and location were high on wish lists, such as ‘pool’, ‘waterfront’, ‘beach’ and ‘view’.
Powell said it was anticipated this would continue because buyers were still willing to pay a price premium for the right neighbourhood and features.
“The global pandemic created one of the greatest lifestyle shifts Australians have experienced. It emphasised the importance of the home and its surrounding community, as well as the ability to work, live and play within a short distance of where we reside,” Powell said.
“Heading into the new year, we expect Australians to have their desire for more space, added security, the balance of life, the right amenities, education, sports facilities and green space on the top of their wish lists.”