Population Growth
The number of people living in Australia is expected to grow again, reaching 29.9 million this year.
With the Australian government looking to bring in more migrants to address job shortages, population growth is likely to be one of the biggest drivers of increased demand for housing.
This influx of new residents will continue to push up the demand for housing.
As well, migration to Australia’s capital cities will likely remain strong as people are drawn to the amenities and job opportunities offered in cities. The economic impact of Australia’s combined capital cities will remain strong, with the number of people living and working in these areas set to increase. This in turn will push housing values up.
Rising Interest Rates
The Reserve Bank of Australia (RBA), after its historic interest rate cut to 0.1% during Covid in 2020, recently embarked upon one of the most intense interest rate hikes in recent memory. The official cash rate now is now sitting 3.10%. Many financial experts are tipping that the RBA will continue to raise rates even further in 2023. However, there is good news – the current level of rates is only expected to rise to 3.35% this year, so mortgage holders should not be too alarmed.
While rising interest rates may be a red flag to some investors, the truth is that there is no single opportune moment for entering the property market and buyers should look more at long-term trends.
An upswing in house pricing is likely
2023 will mark the beginning of a new era in the Australian housing market. Every indication points to a sustained increase in house values, as the population and economy continue to grow.
Prices may decline during the short term, but they won’t erase all the growth achieved during the pandemic-fueled upsurge. We must remember that early indications from these trough periods can often point towards forthcoming periods of price growth – though perhaps not as aggressively as we’ve seen over the past few years. Despite what looks like uncertain times ahead for prices, investors should look to this period as an opportunity for building a more sustainable and resilient property portfolio.
Continued Focus on Affordability
The focus on housing affordability is only set to continue in 2023. The Australian government has been vocal about the necessity of investing in housing supply, and strategies such as their Help to Buy Shared Equity scheme will no doubt help more Australians take the plunge into homeownership.
This scheme will offer eligible buyers the opportunity to purchase a property with as little as a 2% deposit and receive up to 40% of the price in form of equity contribution from the Federal Government. Promising to save some property owners up to as much as $380K over lifecycle ownership, this scheme could be the big game-changer for many first-home buyers.
With measures such as these in the pipeline, as well as an increase in housing stock, the property market looks to be an encouraging one, with plenty of opportunities for buyers. The amount of choice buyers will have in 2023 means that they can shop around and make well-informed decisions when it comes to selecting their home. This is in contrast to the seller-driven market we saw prior to the pandemic, where buyers had to act quickly and were limited in terms of bargaining power.
Other factors will play a bigger role in 2023
While interest rates are widely considered to be a key factor in influencing Australian property prices, there are a variety of other significant factors in play. Tax settings and banking regulations can have an impact on how attractive it is for individuals to invest in property and thus by extension, affect median value. Whilst inflationary pressures have increased the cost of living and caused downward pressure on prices, those in the know believe the worst is now behind us. Furthermore, population growth and household incomes can also provide underlying demand that may push up pricing depending on the area of the market being observed.
2023 will be an exciting time for strategic investors. For these individuals, the decision to enter the market is not one made in haste; rather, it is about having the foresight to recognize future opportunities. They are not concerned with buying on downturns; instead, their main objective is to invest and hold for consistent returns in the long run. What’s more, they understand that precise timing becomes irrelevant when you are devoted to cultivating strong financial gains over extended periods of time. The wise strategic investor knows that 2023 could be their ticket to success.