21 Dec What can we expect from the property market in 2023?
Given the recent developments in the Australian property market, most notably the rise in interest rates and subsequent readjustment in property values, investors are naturally pondering what is to come in 2023.
Below, we have outlined some of the most important factors that property investors should take into account when planning a strategy for 2023.
Not every Australian property market is the same
The first point to note is that not all property markets are behaving in the same way, so it is important to look below the surface, and not just take in the headlines that all too frequently appear in the media.
Within states, even within cities, separate markets have evolved, and so having detailed data about the performance of particular investment areas is essential.
This is one of the many reasons why getting the advice of a property strategist like Power of Property is essential, as we have access to industry information about demographic trends, rent values, etc., that are not generally accessible by the individual investor.
House prices still above pre-pandemic levels
It might surprise you if your only source of information is mainstream media coverage, but across Australia the average property price is still +17.1% compared to pre-pandemic levels (+12.8% in capital cities).
Essentially, while there has been a correction in house prices after what was undoubtedly a boom period, history demonstrates that readjustments after rapid growth have been relatively small, and certainly do not represent a ‘property crash.’
Where will interest rates and inflation go?
Although there have been some sharp interest rate rises in 2022 (compared to the relative stability of the previous couple of years), analysts are predicting RBA interest rates will rise to 3.6% in March 2023 and remain unchanged for the rest of the year. This is expected to be followed by a fall to around 3.1% in March 2024, with further decreases until it hits 2.85% in December 2024.
It is expected that this will be accompanied by a fall in the rate of inflation to 4.7% throughout 2023, down to 3.2% in 2024.
Positive outlook for rentals in the property market
Importantly for investors, Australia is currently experiencing historically low vacancy rates, which means that although there has been a slight slowdown in rent increases, nevertheless the annual growth trend in national rents in August and September 2022 was a record high 10%.
Likewise, gross rental yields on dwellings rose 2.3% in the September 2022 quarter, and although this remains below pre-pandemic levels, it is expected that rental yields will continue to rise throughout 2023 as a consequence of the expected rise in interest rates in the first part of 2023.
Overall, the market continues to look positive for investors. According to CoreLogic, in the September 2022 quarter, rental stock stood at -35.4% below the average over the previous five years, with vacancy rates failing to 1.1%, the lowest on record.
Another important factor that needs to be borne in mind by investors is that international borders are open once more, and we can expect to see more immigration and the return of international students. In addition, internal migration, i.e., people moving interstate to places like southeast Queensland, will also mean that demand continues to outstrip the number of properties available to rent. This supply shortfall in rental properties is therefore expected to see rents remain strong — the ideal scenario for investors.
In simple terms, demand for rental property is as high as it’s ever been, and is expected to remain so for the foreseeable future, and for investors this represents an ideal opportunity to grow your wealth.
Talk to Power of Property about starting your investment journey in 2023
While there has been some turbulence in the Australian property market in 2022, the outlook for investors in 2023 is extremely positive.
The rental market is strong, and forecasts suggest it is only going to get better in 2023.
At Power of Property, we use our extensive knowledge of the property market Australia wide to provide our clients with a variety of unique investment opportunities, including access to new developments that are not usually available to the individual investor.
We are happy to arrange a free, one-on-one strategy session to discuss your options at a time that suits you. Call Michael Lawton on 0407 785 560 or Danielle Charlton on 0411 268 795, or book a property strategy session online.