Australia’s home values might have dropped 5.3% over 2022, the first time yearly fall since 2018, according to CoreLogic. But such was the strength of the recent boom, property prices in many parts of Australia in December 2022 remain well above where they were in March 2020, before the pandemic.
Combined capital city dwelling values are 11.7%, while combined regional values are 32.2% higher, according to CoreLogic.
What’s more, SQM Research founder Louis Christopher, who is one of Australia’s most respected property analysts, doesn’t expect the downturn to last much longer, and has forecast a market recovery in 2023.
SQM’s annual Housing Boom and Bust report predicts capital city house prices will rise 3-7% over the next 12 months in its ‘base case’ scenario that assumes three things:
“No doubt it will be a very challenging year for the Reserve Bank of Australia to walk their tightrope and pull off a soft landing for the Australian economy,” Mr Christopher said.
“However, contrary to current popular opinion, I believe they will manage to do just that.”
Sydney to lead the recovery
If SQM’s forecast proves correct, Sydney would lead the recovery with property prices growing by as much as 9%. This would be driven by:
Perth’s property market is tipped to rise up to 8% thanks to strong rises in employment and interstate migration. Brisbane, Melbourne and Adelaide would also see price growth, of up to 5%.
Three other scenarios
SQM also modelled three other scenarios, depending on slightly different economic conditions: goldilocks, false dawn and recessionary inflation.
Goldilocks is the report’s best-case prediction, and rests on the cash rate peaking at no higher than 4% with the RBA then pivoting to rate cuts (a forecast in line with CommBank expectations).
If this happens, Sydney and Perth would see double-digit price rises, with all capital cities, except Darwin and Canberra, recording positive growth.
Recessionary inflation is the worst-case scenario, and assumes inflation exceeds 7%, the cash rate rises above 4% and unemployment jumps to over 6%.
“There is of course a risk the RBA may need to go further. If they do then the risks of a hard landing in the economy do substantially rise and thus, a hard landing in the housing market would also occur,” Mr Christopher said.
In this scenario, combined capital city prices could fall up to 6% led by Darwin (-13%), Brisbane (-12%) and Hobart (-10%), with only Perth experiencing positive growth.
The false dawn scenario would see property values grow by up to 4% nationally, after the cash rate passes 5% in the second half of 2023 and inflation soars to 10%.
Why it shouldn’t matter what property prices do this year
No one knows what the future holds or whether Mr Christopher’s forecasts prove accurate.
Regardless, it’s generally best not to try to time the market when buying a property. Rather, many expert advise that you focus your efforts on buying the right property at the right price, before letting time in the market work its magic.
That’s because history suggests that if you buy a property in a good location and hold onto it for the long term, you’ll be rewarded with capital gains – with Australian property values increasing by a stunning 382% over the 30 years to July 2022, despite six downturns during that timeframe, according to CoreLogic.
It’s also a great time to be in the market for a new home, with listing numbers up 4.6% over the year to December 2022, increasing choice. At the same time, buyer demand is down, decreasing competition and making it more likely you can drive a hard bargain during the negotiations.
Looking to buy an investment property? Shore Financial can help. To discuss your options, call us on 1300 416 700, email us on info@shorefinancial.come.au or fill in this online form.
We appreciate your message and a Shore Financial Adviser will respond to you within a few short days. In the meantime, here’s a few links to keep you occupied.
We appreciate your message and a Shore Financial broker will respond to you within a few short days. In the meantime, here’s a few links to keep you occupied.
