Whether you are planning on buying a home or selling one in 2023, it is essential to understand property forecasts for the Australian housing market. Several factors will influence the future of property prices, including interest rates and the economy. These will play a significant role in determining the Australian housing market predictions for 2023.
Mortgage Stress and Rising Interest Rates
Many homeowners are under mortgage stress, with many struggling to keep up with repayments as the Reserve Bank of Australia continues to hike interest rates. It is causing mortgage holders to pay more interest than they can afford, which has already started to affect consumer spending as higher borrowing costs push up the cost of goods and services.
The cash rate has already been lifted once in December, and AMP's chief economist Shane Oliver predicts further rate increases will continue to pressure household finances, pushing total mortgage payments above the levels of disposable incomes for most households. This will further add to the financial strains many homeowners bear, which are already starting to impact their ability to save for retirement.
A Stronger Local Economy in Regional Areas
As many capital cities struggle to lift house prices, local areas are experiencing some of the most robust value growth. This is due to several factors, including record-low vacancy rates, relative affordability and strong local economies.
Some regions, such as Townsville, Toowoomba, Rockhampton and Bundaberg, are experiencing positive growth in property values and are expected to remain so in 2023. However, other regions will experience a slowdown in the pace of capital growth.
Property Experts Believe 2023 will Be Stable
There are still plenty of reasons to be optimistic about the Australian housing market in 2023 as long as the economy strengthens. These factors include low unemployment, rising wages, and the easing of mortgage interest rates.
The good news for buyers is that mortgage stress levels have decreased significantly from the last peak and are expected to drop further in the coming year. While many borrowers are still struggling to make ends meet, most will be able to afford their repayments again soon.
First-home Buyers Upgrading to Larger, Better Homes
Many first-home buyers are forced to take out larger mortgages than they can afford now upgrading their accommodation. Increasingly, many are choosing to purchase homes in better neighbourhoods that have become desirable places to live.
As a result of these trends, many new homeowners are finding it harder to sell their homes as there is a shortage of available properties for sale in most parts of the country. But, as more and more people find it possible to upgrade their accommodation to become homeowners, the outlook for the Australian property market should be positive in 2023.
According to Westpac senior economist Matthew Hassan, a significant improvement in consumer expectations for property prices last month jumped the gun by miles. Despite this, he believes it is unlikely to reverse the decline in property prices and said a slump was a more likely scenario than a rebound.
