No matter where you were in 2022, property was a hot topic of conversation with people talking about it everywhere from the pub to with workmates and everywhere else you can think of. People talked about soaring interest rates and their effect on mortgage holders. The rental market, as discussed with tenants, worried that their rents would increase due to rising costs and rising rates. Politicians on both sides of the political spectrum talked about how to ease pressure. Pressure on the housing market and what renters, owners and buyers could expect. So what exactly can we expect from the housing market in 2023 and beyond?
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Where will property prices go?
With rising interest rates, demand in capital cities is expected to slow down, and that will lead to further price drops than what we are already experiencing. Property experts say that this is normal and that the sector goes through cycles based on the economic conditions at the time. While prices will fall, experts such as Domain’s chief of economics and research, Dr Nicola Powell, say that the drops will not erase the post-pandemic upswing. Generally, the property market goes through longer booms than contractions, so any declines are expected to be short-lived.
There may be a limited time to get a bargain when purchasing a new property. Due to rising interest rates, first home buyers who are planning to buy are expected to face less competition. They could potentially snap up a bargain that they wouldn’t have been able to get in previous times, and they will have negotiating power.
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Now is the time to upgrade your home
The goal with your first property is generally to get on the property ladder and to build your equity. When you’ve built enough equity, you can look to upgrade. Either you will upgrade from an apartment to a house or a bigger apartment, depending on your requirements and the area that you are looking in. Homeowners are expected to upgrade their homes in 2023 and beyond. Others may start with rentvesting and then, as the opportunity arises, buy a property that they can live in. Our brokers can help you understand the importance of building up equity and how it can help you reach your future property goals.
Read: Negative Gearing vs Positive Gearing: Pros and Cons
Factors that will influence the property price
Over the last few months, everyone has been talking about interest rates, with economists and property experts expecting demand for property to slow. When interest rates are higher, the demand for property decreases, as does the amount that a homeowner can borrow. As interest rates increase, first-home buyers are more hesitant to enter the market. First home buyers are more likely to be affected by interest rate hikes due to having less equity in their property. Despite the constant talk about interest rates, they aren’t the only factor that will influence property prices in 2023. Tax, banking relations, overall demand and household income will also affect prices.
Stamp Duty on Property
Recently, both the Queensland and Victorian state governments have said that they do not plan to replace stamp duty with an annual tax like in NSW. This contradicts what experts think, with experts saying that changing tax policy will help first-home buyers get onto the property ladder faster. In NSW, first home buyers have the option to pay either stamp duty or an annual land tax. Under the scheme, first home buyers would pay an annual fee of $400 plus 0.3% of the land’s value. Effectively, this means you can expect your tax to rise every year that you hold your property.
While it is less money up front, it may cost you more in the long run, so if you are buying in NSW and thinking about opting for the annual payment instead of stamp duty, it is worth talking to your mortgage broker about what is the best option for you.
Household Income & Property
As usual, high-income households are a lot better equipped to buy property. That does not mean that those on lower incomes cannot buy properties. It just means that they are more limited in where they can buy. Instead of buying in the city or a nice suburb, they may have to buy further out or a smaller place. Rentvesting is another option for buyers who can’t afford to buy where they want to. Rentvesting is where you buy a property that you can afford and rent it out. Then, when you have built up the equity, you can either purchase a second investment property or upgrade to a suburb that you want to live in.
Suburbs with higher-value houses tend to be less affected by market upswings and downturns. It’s less likely there will be sharp increases or declines.
Refinance Home Loan at a Better Interest Rate
If you are struggling with your home loan repayment, it’s best to look at the options available with your mortgage broker. There are options like refinancing into interest-only repayments while your situation gets better. You can also refinance at a better interest rate to lower your repayments. You might also qualify for cashback, which can assist in your household expenses or home loan repayments.
High immigration will push property prices up
While property prices did not jump as sharply during the COVID pandemic because of lower immigration, experts are predicting that they will increase as immigration surges. The Australian government has increased the number of people eligible for the permanent migration program, which means more people will need somewhere to live, and that will push both rents and property sale prices up, particularly in the capital cities, where there are more jobs and greater infrastructure. Infrastructure is also a determining factor for property prices.
Also Read: How to Calculate Rental Yield?
Quality Homes
Several years ago, people would have been happy to live in a home without AC, to use a fan on hot days. Now that more and more of us are working from home, people will be seeking a more liveable home. While that will mean different things to us, there are some things that will be mandatory in a home. Things such as air conditioning and balconies for apartment dwellers. People who work from home are also seeking good properties. Properties that have study or extra rooms that can be used as an office, buyers are willing to pay a premium.
Interest rates
Interest rates have been the hot topic for the last year. However, there are news reports that they will only go up a couple more times and then they will stabilise. Time will tell, and it is recommended that first home buyers research the market and get finance approved before visiting auctions.
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