Market interventions from the Reserve Bank and APRA this year will either result in real estate prices stabilising or more tough times for the property market in 2023, according to a new report.
The Bricks and Mortar Media Property Forecast Report for 2023 features 14 experts discussing their thoughts on the market 2022 and what’s likely to occur over the next 12 months.
The report describes the 2022 Australian property market as “surprising” with homeowners welcoming extraordinary capital gains across just about every location.
However, once the RBA begun lifting the official cash rate in May, few could have predicted interest rates increasing so swiftly and dramatically, with the effect felt immediately.
The report allows for a diverse mix of positive and negative market drivers. It asks industry experts four questions:
Property Investors Council of Australia (PICA) chair Ben Kingsley (pictured above left) said there were two scenarios people should consider and they both have to do with market interventions in 2023.
“Firstly RBA and interest rates – if the cash rate stabilises at just above 3% and we don’t see rate rises from this point forward as inflation begins to ease, plus we see APRA reduce their servicing buffers back down to 2% or 2.5% allowing borrowers back into the market – then we’ll most likely see a stabilising of prices in more states than less from the current declining markets we have now,” Kingsley said.
“Secondly if the cash rate pushes to mid-3% and even beyond, we will continue to see a very sluggish market, with further price corrections, even if APRA do adjust their buffer rate down. If they don’t move the buffer rate at all in 2023, we are in for a tougher landing in the property sector than was really needed and this will cause unnecessary pain on more households than needed.”
Australian Mortgage Awards 2021 Broker of the Year and director of Zippy Financial, Louisa Sanghera (pictured above centre), said the biggest driver of interest rate hikes in 2022 was sky-rocketing inflation.
“In 2023, the current forecast is for inflation to start to stabilise and return to more balanced levels by the middle or end of the year, but of course, these predictions are not set in stone,” Sanghera said.
“The Reserve Bank aims for an inflation target of 2% to 3% so they could continue to make changes to the cash rate throughout 2023, depending on how inflation tracks.”
Sanghera said in the mortgage space, the rate of innovation in digital banking was definitely something she was keeping her eye on.
“Many of the bigger banks have acquired the new, digital banks and the technology these neo banks is creating is setting the benchmark for standards that will be ‘normal’ for the industry within the next decade,” she said.
“The digitisation of the mortgage market quickly escalated during the pandemic and those innovations are set to continue well into 2023 and beyond as finance and property businesses find more and more efficient ways to do business.
“The adoption of digital conveyancing in the last few years is one such example, along with digital VOI. These innovations take some of the friction out of the finance process and more of this can only be a good thing for the industry and for mortgage holders.”
In September, Sanghera said first home buyer activity was plummeting and it had returned to a level lower than what was recorded pre-pandemic.
She said first-home buyers had been “increasing slowly after many years on the sidelines because of the high property prices at the time – or so they seemed in retrospect”.
Scott Aggett (pictured above right), founder of property negotiators and analysts Hello Haus, said there were record low vacancy rates throughout Australia with little government acknowledgment of the large social impacts this was having on the market.
“With a growing population, where will people live?” Aggett said.
“The advancement of technology has fast-tracked our ability to live and work anywhere in Australia which allows people to maintain high-paying salaries and not have to live in some of the world's most expensive cities such as Sydney. The regions have been the biggest beneficiaries of this, with the Gold Coast leading the pack, according to the Commonwealth Bank Regional Movers Index Report, with an 11% increase in migration over the last 12 months, followed by the Sunshine Coast at 6%.”
Aggett told Australian Broker in November that buyers were taking their time to purchase a home, by identifying five key reasons Aussies were taking longer to transact on a property.
“Buyers are getting their finance pre-approval, but difficulties afterwards with locating and negotiating on a property are causing them to take considerably longer than they should to contract,” he said.
“Mortgage brokers can help their clients by ensuring they are ‘buyer ready’ whilst awaiting conditional loan approval. There are practical steps brokers can take to assist their clients.”
Adviseable property buyer Kate Hill said 2023 would provide an opportunity for people to buy property when others were not, as long as buyers were strategic with asset and location selection.
“You have to recognise short-term trends as exactly that – even though they may be unsettling at the time,” Hill said.
“The power of negative press is not to be underestimated. If ever there was a time to block out the white noise and remember that everything works in cycles and the best time to carry on with your investment plan it's now. The early parts of 2023 are a real window of opportunity while some property markets take a breather and there is less of a frenzy out there. Having said that, many of Australian property markets remain super active and are most definitely not slowing down.”
MCG Quantity Surveyors managing director Mike Mortlock said he expects the market to continue its decline into the middle of 2023.
“From there, all eyes will be on the inflation numbers and how effective the rapid tightening cycle has been,” Mortlock said.
“A significant portion of inflationary pressures are extrinsic to the domestic market, but international production and logistics issues appear to be working themselves out. Sentiment is likely to turn very quickly once the RBA meeting minutes show some indication of a future easing of rates, so investors with a longer-term outlook would do well to consider purchasing before that happens.”
