The main four banks forecast price decreases of between -10% and -15% for 2023, and the RBA cash rate is expected to announce another rate rise, with a further 1% point increase anticipated for early next year.
We have temporarily waved farewell to the heydey of 2021, when prices in the real estate market exploded, due to rising gas prices, food and other sundries costs, mounting pressure to make mortgage payments, and a rocket-like rise in the cost of living.
Recall that Sydney led the way in June 2022 when Australian home prices began to decline for the first time in two years, by 2.7% in the June 2022 quarter.
All major cities are experiencing a decline in prices; however, according to this data from CoreLogic, Sydney has dropped 10.27% since its high in 260 days, while Melbourne has dropped 6.42% in 290.
Source: CoreLogic Index, updated daily, 29th October 2022
What Can We Expect from the 2023 National Real Estate Market Forecast?
According to PropTrack's estimate, national housing prices are predicted to keep falling throughout 2023.
Market acclimatisation to "sharply rising interest rates and continuing uncertainty over peak borrowing costs" may take some time.
The national median house price might decrease by almost $150,000 by the end of next year, or about $230,000, according to RateCity.com.au's study of ANZ property price estimates based on CoreLogic's adjusted median from December 2021. (2023 minus 9 per cent).
According to the Reserve Bank of Australia (RBA), borrowers whose fixed-rate loans mature by the end of 2023 will experience a rise in their monthly repayments of approximately $650 to around $1,000 after already seeing a $500 increase.
Instead of reflecting increased borrower distress, the reduction in real property prices is a reflection of decreased borrowing capacity. Borrowers will be evaluated a higher interest rate than before together with a greater cost of living when they apply for a loan. As a result, their borrowing capacity will be limited, which lowers housing prices because less money is available for consumer spending.
Therefore, the pressure of a higher cost of living also impacts how much individuals can borrow and, consequently, how much they can afford to pay for a house for those of us want to buy a house but require a loan. The majority of the time, increased interest rates and higher prices for essential products and services prevent them from borrowing as much.
"However, there are still people wanting to purchase homes because of the strong work market, and we anticipate more pay hikes than in previous years. They won't, however, receive the loans they may have received even six months ago."
For those of us who may need to sell our homes.
Sydney property price forecast for 2023
Property prices in Sydney are forecast to fall by 6% in 2023, having already fallen by 14% in 2022.
Melbourne Property Price Forecast 2023
Property prices in Melbourne are forecast to fall by 6% in 2023, having already fallen by 11% in 2022.
Various researchers forecast that as 2023 draws to a close, interest rates will stabilise and that by 2024, housing prices would rise across the board in all capital cities.
In reality, a 5% increase in house prices is anticipated in that year as a result of salary growth and declining mortgage rates.
According to RateCity, if rents continue to grow and home prices drop, rising demand from consumers looking for great deals might cause the market to turn around earlier than anticipated and bring investors back into the market.
The demand for housing financing from upgraders, movers, and downsizers seems to be pretty durable despite rising interest rates.
Indicators including an improvement in consumer mood, a "modest" increase in auction liquidation rates, and a decline in listing activity in the spring all point to the potential that the correction may be easing.
In order to increase your chances of selling for a fair price in 2024 when the market recovers, it is advised for those of you who need to sell to put up a fight through this "cold" winter.
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