JOHN MCGRATH – MARKET PREDICTIONS FOR 2023

from Edition 31 January 2023

Jobs for the yard in February

I’d like to wish everyone a great new year as we enter the second phase of this market correction. The property market’s performance in 2023 will be largely dictated by interest rates. After a 3% increase over just eight months last year, there are signs now that they won’t go up much further.

This is because the latest data shows inflation growth might be at or near the peak in both Australia and the United States. This is important because it’s the primary reason why central banks around the world have been aggressively increasing interest rates.

CoreLogic’s final property market data for 2022 showed a -5.3% fall in Australian home values over the 12 months. Since the peak of the pandemic boom in May 2022, the decline has been -8.2%.

That’s pretty fast but no cause for alarm. Remember, this is our first rate-rise cycle in more than a decade, so of course it’s a big shock to the system. Plus, this price decline follows an almost 30% increase in values, so some perspective is useful while we watch the market recalibrate in 2023.

CoreLogic says the pace of price declines began slowing in September, so we may be through the worst of it already. Once rates stop rising, they’ll likely stay still for a period while the local and global economy is monitored. During this time, thousands of borrowers will come off very low fixed rates and convert to variable rates, which will typically be more than double what they were paying.

This might result in some selling but probably not a lot. Australians have amassed huge savings, so many borrowers have offset or redraw accounts flush with extra cash to cushion that blow.

I think the greatest headwind for the market in 2023 will be the difficulty buyers are going to face getting finance, especially single purchasers like first home buyers. The banks add 2.5% when assessing your serviceability for a loan, so some people are getting accessed at 7% or 8% now. Nationally, the likely result will be a bit less buyer activity in the first half of 2023 until it’s clear that property prices have hit their bottom.

Then, with the rental market so strong, we may see the return of investors first as the market cycle turns. Rents went up by a record 10.2% last year. The Sydney and Melbourne inner city apartment markets are coming back particularly strongly now because of overseas migrants returning.

All the other trends we’re seeing now are common in corrections. Lower listing numbers (down about 12% annually), lower sales volumes (down about -15%), higher days on market (from 20 days to 35 on average), and greater vendor discounting.

CoreLogic data confirms the more expensive suburban markets are seeing sharper price declines, and there’s more resilience in more affordable markets – including regional areas.

I advise homeowners not to get too caught up in the minutiae of market analysis this year. Enjoy your home, continue with your loan repayments, and just remember that property is a long game.

Over the past 30 years, CoreLogic data tells us capital city house prices have gone up an average of more than 450% and regional house prices about 315%. While that was happening, there were some tough years and periods of correction like we’re in now. There’s no cause for concern. Whatever your property goals are for 2023, I wish you all the very best.

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Meet the t ea M

Karla Grant Reception and Property Management support

Have you met Karla yet? Karla Grant is the friendly face that will greet you if you call or visit our McGrath Beerwah office.

Karla has enjoyed a highly successful career in real estate over the last 10 years as a Property Manager and acts as an extension of our amazing property management team when she is not busy delivering her outstanding level of customer service to all our clients each day.

Driven and enthusiastic, Karla prides herself on her ability to manage her time and efforts effectively.

She is an award winning sports woman, having represented Australia in boxing internationally. When she is not busy working or training in the gym, she enjoys being the best mum she can be to her three beautiful children.

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Cocooned in lush greenery with north-easterly vistas across the Sunshine Coast, this magnificent lifestyle residence and cottage exudes tranquility and the timeless appeal of a stately country estate, presenting a rare opportunity to secure the ultimate in secluded Hinterland dual living. The generous, four-bedroom, main residence with a range of upgrades enjoys a free-flowing floorplan that seamlessly connects spacious indoor living with landscaped grounds and an elevated, timber deck designed to drink in the sublime surrounds. The charming secondary cottage is thoughtfully positioned away from the main residence and features an open plan lounge and dining area; fully self-contained kitchen; a single bedroom with ensuite and a tranquil front porch providing the perfect scenario for dual living or supplementary rental income.

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