After reaching extraordinary highs during the pandemic, local property prices slowly decreased in the second half of 2022 as interest rates rose. But what can we expect in 2023? Keep reading for a property price update and expert predictions for 2023.
The current state of the market
House sales remained strong in early 2022 until interest rate rises began to bite. Some home owners, lulled by the Reserve Bank’s assurances that interest rates would remain low, were over-leveraged and new buyers found themselves unable to get finance for properties they’d set their hearts on. In the Sydney property market, prices fell for the first time in two years in June 2022 by 2.7%. In the past 12 months, there has been a decrease of 9.3% in Sydney overall.
We believe this isn’t anything to be too concerned about. It’s a natural correction rather than a true loss of value after prices reached staggering heights in 2021. The median house price in Sydney is currently $1.257 million (In Balmain, $2,585,000) and the median unit price is currently $783,406 ($1,260,000 for Balmain) so these figures are still something to smile about for Sydney sellers. Most home prices are still higher than they were in 2019.
There’s also been a strong focus on auctions in Sydney, with auction clearance rates above 65% at the end of 2022. We expect this trend to continue into 2023. Here at Belle Property Balmain we know that, historically, downturns are shorter in duration than upturns, so we’re confident that by about mid 2023 it will be a seller’s market once more in Sydney. We’re ready to adapt our sales strategies to suit the market, whichever cycle it’s in.
The property market and interest rates
The Housing Boom and Bust Report from SQM Research predicts that capital city house prices will increase by 3% to 7% in 2023. However, this prediction depends on interest rates not rising above 4%, inflation dropping to 5% and unemployment staying below 5%.
The Big 4 banks all have different interest rate predictions for 2023:
- Commonwealth Bank expects there to be no more interest rate rises.
- NAB expects the cash rate will increase to 3.6% in March.
- ANZ and Westpac both predict the interest rate will hit a peak of 3.85% in May.
While we may be in for one to two more interest rate rises this year, we expect that higher mortgage rates will see buyers decrease spending on consumer goods like cars and electronics. These adapting strategies should see a decrease in inflation, the key reason behind interest rate rises.
Simon Pressley from Propertyology says all the property market fundamentals of 2021 still exist today except for buyer confidence due to the increase in interest rates and cost of living. But both these factors should be corrected in 2023. The Australian Government’s First Home
Guarantee is also still available to attract reluctant first-time buyers into the Sydney property market while prices are down.
Property price predictions for 2023
Just as for 2020, every bank and property expert has a slightly different prediction for where property prices are heading in 2023. The cumulative result, however, is there will be a slight decrease in sales prices before growth again in 2024 once inflation and interest rates settle down and buyer confidence improves. (Instead of FOMO, we’re now seeing more FOOP ‒ fear of overpaying ‒ but once the market settles down later in the year, that will pass.)
ANZ expects property prices to decrease by 6% in Sydney in 2023 and 9% in Australia overall. However, they predict that house prices will bounce back in 2024 and increase by 6%. ANZ Senior Economist, Adelaide Timbrell, believes the current decrease in housing prices isn’t so much due to a lack of buyer confidence. Rather, it reflects buyers’ reduced borrowing capacity due to higher rates and a higher cost of living.
We know there are buyers out there. Chinese buyers are returning to the market, which has an effect on the market in general. If you’re ready to sell, let us help. We have experience through all sectors of the property market cycle and can ensure that you get a sales price you’ll be happy with.
Can we help with your Inner West home?
Whether you’re ready to sell or need help to rent your investment property, we have the experience and local knowledge to make your property journey easier.
Looking for help selling your home or renting your investment property? Our team at Belle Property Balmain supports homeowners across Balmain, Balmain East, Birchgrove, Rozelle and Lilyfield. Feel free to get in touch for a no-obligation discussion or property appraisal.