Simon Bednar –THOUGHTS ON THE MARKET 2023

Twelve months ago, no one was predicting official interest rates would be rising at all during 2022. Even the Governor of the Reserve Bank of Australia (RBA), Dr Philip Lowe, was repeatedly stating that he didn’t see economic conditions would force the central bank to increase its then cash rate of 0.1% until at least 2024.

The Russian invasion of Ukraine in February, 2022, changed the global economic ball game and since then central banks around the world have been lifting their official rates to combat inflation, with the RBA’s cash rate finishing the year at 3.1%.

I believe interest rates will continue to rise in the first half of 2023 as the RBA maintains it battle to bring inflation under control and back to its target range of 2-3%. We should see a short period of stability once this milestone is hit, then I anticipate a small reduction towards to end of the year as the RBA releases some monetary pressure once they have a handle on inflation.

In this climate of rising interest rates, house prices will continue to fall and should bottom out at 20%. This is slightly less than the overall gains from September, 2019, where we saw an increase of almost 25% during the COVID-19 peak.

The rental market will continue to be tight with housing supply still a massive issue due to the shortage of workers in the construction sector. With the federal government further opening up borders, the migrant inflow will add to the pressures on the rental market.

Consumers looking to purchase property or refinance will look for the best possible deal as they try to save as much money as possible in a tightening market. This will lead to a large increase in refinancing, which we are already starting to see. There may be a desire to look to cheaper and non-mainstream brands to achieve this.

In these situations, brokers will see opportunities to assist investors and first home buyers. Investors will be looking to get into the market due to the increase in demand for rentals with low vacancies and good returns exacerbated by increases in migrant workers. First home buyers will see an opportunity to enter the property market with reduced house prices and consequently reduced capital requirements.