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6 property trends to expect in 2023

A property expert gives his predictions for the housing market, rents and more for the year ahead.

People at property auction. Aerial shot of houses in Australia.
Here’s what a property expert is forecasting for the year ahead. (Source: Getty)

House prices will gradually recover but it may take some time, according to one property expert.

Founder and the head of research at buyer’s agency InvestorKit, Arjun Paliwal, has revealed his top six property predictions for the coming year, including what’s in store for renters.

Here’s what he has forecast.

1. National house prices will recover

For those looking to buy or sell this year, Paliwal said to expect a gradual recovery in national house prices in the mid-to-later half of the year. However, Sydney and Melbourne homeowners are expected to see a slower rate of recovery.

Housing supply levels remained restricted, Paliwal said, with just 236,000 homes listed for sale, according to the latest October-ending data.

“We are seeing roughly the same amount of listings for sale as 12 years ago, which is concerning. This supply and demand is what will ultimately drive up house prices,” Paliwal said.

2. More first home buyers will enter the NSW market

The NSW government’s stamp duty changes kicked in this week, giving first home buyers the option of paying an upfront stamp duty or annual property tax.

This change would lead to more first home buyers entering the market, Paliwal said, and may encourage other states to follow suit if successful.

3. Rental crisis will continue

Rent prices increased a whopping 10.2 per cent last year, but this slowed slightly in the December quarter. Paliwal predicted the rent crisis would continue, with population growth - due to reopened borders - adding to the pressure.

“Analysing market data and trends, we predict the rental crisis will continue, if not worsen, in 2023, with rent prices set to rise by at least 10 per cent in most Australian cities,” Paliwal said.

4. Interest rates will balance out

Interest rates rose rapidly last year, with the official cash rate now sitting at 3.10 per cent. Given the substantial rate rises we experienced last year, Paliwal said we could potentially expect cuts in 2023, but not until the last quarter.

“The significant interest rate hikes have severely reduced credit take-up, which means the RBA will need to balance credit flow, unemployment, spending and inflation, as we expect those things to worsen over 2023,” he said.

“The RBA will realise their increases have been overshot and, as a result, lowering the cash rate in the final quarter of 2023 may prove to be their only move.”

5. Banks will review lending requirements

With lending slowing, due to rising interest rates, Paliwal predicted banks would consider changes to their lending requirements in line with APRA support.

“Six to 12 months ago, borrowers were being assessed on 2-3 per cent interest rates with a 3 per cent buffer,” he said.

“With home loan serviceability now calculated based on an 8-9 per cent interest rate, scaring off borrowers from applying while others are being rejected for more expensive mortgages, the banks will need to find a way to bring borrowers back as borrowing capacity declines and shrinks credit up-take.”

6. Smaller regions will see growth

Lastly, Paliwal predicted smaller regional centres would continue to experience strong capital growth. This would be driven by low vacancy rates, an undersupply in houses for sale, relative affordability and strong local economies.

Some standout regions would include Townsville, Toowoomba, Rockhampton, Bundaberg, Albury-Wodonga and the Barossa Valley, Paliwal said.

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