January 2023

Real Estate Round Up #54

A new year

SMH reports on CoreLogic data that states the national property market has had the steepest fall on record, with a 10.9% drop in 2022. In this and an earlier article, the similarly record breaking rate rise over a similar time period, and reduced borrowing capacity are cited as the main culprits. The former article quotes Dr Nicola Powell who expects further value falls to a total of 18% assuming the RBA rate hikes do not exceed 3.85%.

Domain also suggests that first home buyers with strong nerves will likely find there is reduced competition and (slightly) reduced prices in 2023. With a 31% reduction in first home buyers on the market in the 12 months to November, now isn’t an awful time to get into the market if all your ducks are lined up. A similarly themed article asks whether 2023 will be a good time for investors to purchase properties, with the prediction again being in the positive.

So where are first home buyers buying? This story in Domain lists some of the most popular suburbs across Australia for first homebuyers. In Sydney, the main areas can all be found in the western suburbs from north to south, with Schofields towards the north topping the list. By unfortunate coincidence, some of the most popular suburbs that are in and around the Hawkesbury-Nepean valley, including large parts of Schofields, are also those that are prone to flooding. Buyer beware!

2022 in Summary

In regards to capital growth, this story from The Real Estate conversation quotes CoreLogic head of research, Eliza Owen, who makes note of 2 distinct characteristics for the past year:

  1. “More expensive markets tended to see sharper declines, while the more affordable segment of the market where buyers typically do not have to extend themselves as much to buy into, saw greater resilience to increases in interest rates,”
  2. “The second trend is the pace of decline has been slowing on a broad basis since September. While this may be seen as a positive by some, there is still risk of the decline re-accelerating in the year ahead.”

Some other major things from the year are covered by John McGrath in this article. This latter story notes that interest rates rose at the fastest rate since 1994, and supply chain and labour shortages have seen building costs rise “at their fastest pace since the introduction of the GST.” There has also been less growth in the capital cities than there has been in more regional areas for the first time in over 40 years, and of course the massive reported rise in rental prices.

The Sydney housing crisis continues to worsen despite a slowing of the rate of rental price hikes according to this article.

The dream: an abundance of EV chargers

Moving ahead

Domain’s chief of economics and research Dr Nicola Powell starts the year with a rundown of expected trends for 2023. In short:

  • The current downturn in values will not remove all increases from the most recent boom (illustrated by this article about Brisbane)
  • The record gap between the median price of units and houses will close to some extent
  • The majority of the RBA’s rate rises have been done, and so new buyers will be ‘forward planning’ with this new normal in mind
  • Renters can expect additional pain due to an expected surge in immigration
  • ‘Livability’ in housing purchases will continue to trend post-COVID (for example, a space for a home office or study, and/or further utlity in the home environment)

However, something the story does not cover is the difficulties being experienced in the building industry. This ABC article notes that both interest rate increases and inflation are increasing building costs, even though some of the supply chain issues from the last couple of years are resolving. Quoted prices are getting harder and harder to stick to, with price estimates “irrelevant within 30 days” in some instances.