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Is it a good time to buy property in 2023

Is the Australian Property Market Favorable for Buyers to buy property? An In-Depth Look at the Forecast.

Whether you’re a first-time home buyer looking to plant your roots or a seasoned investor looking to build your property portfolio, you might be considering if this is the optimal year to invest in a home. 

The post-pandemic market was plagued by soaring home prices, sharp interest rate increases, and inflation higher than in recent decades, so many buyers are rightly left wondering if they can purchase a property in the coming year.

Property investments, similar to stocks or bonds, should not be approached with the goal of timing the market accurately. Rather, it is a long-term venture and should be undertaken when you have the ability to properly execute. Seeking to capitalize on any perceived weakness in the market can result in forfeited opportunities that end up being prosperous in the future. When considering property investments, it is important to remember you are playing a long-term game and the ideal time to act is when the chance presents itself, rather than trying to predict the ebbs and flows of the market.

In the past year, Australian home values have been on an 8-month downward slide that all four major banks expect to continue, as a result of the fastest RBA rate hikes seen in history. 

Let’s dive into the data and explore if there will be buying opportunities for Australian investors in the 2023 market. 

Navigating Beyond The Post-Pandemic Australian Property Market 

Following a peak in April 2022 fueled by emergency low-interest rates, the overarching theme of the second half of last year revolved around declining home values, creeping inflation, low consumer confidence, and rate surges to over 3.35% by the RBA on 7th February 2023.

Rapid rise in cash rate; Focus Economics - Australia Monetary Policy 2022
Rapid rise in cash rate; Focus Economics – Australia Monetary Policy 2022

Property values began to turn over in Q2 2022 with the CoreLogic Daily Home Value Index (HVI) hitting a decline of -8.40% in January 2023 in just eight months, the quickest on record. The rapid increase in interest rates has been the primary driving force behind the significant decline in property values. The 300-basis point hike in the underlying cash rate has limited borrowers’ ability to offer higher prices for homes, and the added burden of higher interest costs has led to an exodus of buyers from the market. 

 Decline in the CoreLogic HVI, relative to previous periods of decline.
Decline in the CoreLogic HVI, relative to previous periods of decline.
CoreLogic Change In Dwelling Values By Region
CoreLogic Change In Dwelling Values By Region

Coupled with inflationary pressures and post-lockdown increase in savings spending, there’s no going around the fact that homebuyer affordability was eroded last year.

Even with these factors, savvy property investors with experience understand that rising interest rates and falling property prices are only pieces of the puzzle when it comes to investing in real estate. It is important to recognize that constructing a property portfolio should be done through meticulous planning, rather than in a hurry like rushing into your favorite store on a Black Friday sale. It is important to factor in multiple elements while preparing your property portfolio, such as designing both short and long-term portfolio goals, creating appropriate ownership structures, and devising a diverse financing approach. Taking all of these aspects into consideration will guarantee that your portfolio will achieve success in the long run.

Will Australian Home Prices Crash This Year?

The current downturn in Australian housing is primarily a credit availability issue and has not been driven by factors such as unemployment or an oversupply of homes, according to Maree Kilroy, Senior Economist at BIS Oxford Economics. Since the RBA began raising interest rates in May 2022, it has continued to hike rates for nine consecutive months, lifting the cash rate to 3.35%—its highest level in nine years

 Australian Stock Market Exchange 30 Day Interbank Cash Rate Futures Implied Yield Curve
Australian Stock Market Exchange 30 Day Interbank Cash Rate Futures Implied Yield Curve

Economists agree that as long as the cash rate continues to rise, home prices will be inversely affected. 

Eliza Owen, Head of Research at CoreLogic Australia, says that the Big Four banks are expecting combined capital cities prices to fall by a median of 16% while the BIS Oxford Economics forecast expects a 13% fall for houses and 8% for units, with Sydney expected to have the greatest fall at around 18%.

However, due to a robust labor market, stable property demand, high rent, and overseas migration, Australia is unlikely to experience a housing crash anytime soon, according to Kilroy.

Furthermore, Creagh and other leading economists believe that after the expected rate hike in February, the RBA will pause to assess the effects of rising rates on the economy. With strong economic fundamentals and the easing of interest rates, it seems there is light for Australian buyers.

 Australian Stock Market Exchange 30 Day Interbank Cash Rate Futures Implied Yield Curve
Australian Stock Market Exchange 30 Day Interbank Cash Rate Futures Implied Yield Curve

Should I Buy A Home(buy property) Now In Australia?

When thinking of becoming a homeowner, it is essential to carefully consider property prices, examine local markets, and assess your finances beforehand. If you’re investing by yourself, you probably won’t be able to borrow as much as someone who is investing with their partner, as your income is likely to be lower. Nevertheless, if you are buying with a partner, you could potentially afford bigger repayments, but what if one of you decides to stop working to begin a family or go back to school? To be on the safe side, it is a smart idea to put yourself through a ‘stress test’ with a rate that is two or three percent more than the present market rate. This way, you can guarantee yourself a buffer in the event of a rate rise. This is especially important as the the primary driving factor behind the Australian housing market slump has been the continuous rate hikes instituted by the Reserve Bank of Australia. The December rate hike brought the cash rate to 3.1%, and the expected Feb increase could add another 25 basis points.

Ben Kingsley, Chair of the Property Investors Council of Australia (PICA), believes if the cash rate pushes to mid 3% and beyond, there will be a very sluggish transactional activity, but expects increased rental prices, a strong labor market, and property demand from migration to bolster the market.

Corelogic Annual Change In Rent, Houses & Units
Corelogic Annual Change In Rent, Houses & Units

Experts also agree that as interest rates stabilize and buyers have access to more borrowing power, there should be an uptick in home values and transactional activity as 2023 progresses. 

Sally Tindall, Research Director at, states that an increase in demand from buyers searching for a good deal may lead to a turnaround in the market earlier than expected, with investors returning to the market early if rents continue to rise while property prices fall. Despite rising interest rates, demand for housing finance among those looking to upgrade, move, or downsize appears to be relatively stable.

 As property purchases are a long-term investment, it is crucial to look at pre-Covid data to accurately forecast the future. During the early days of the pandemic, many felt that the real estate sector was doomed and that it was not the right time to invest. However, values kept on climbing, leaving those who bided their time in the dust as prices soared to astronomical numbers. And despite the negative impact of COVID on many areas, housing values have generally remained high. In the capital cities, values are 11.7% higher than they were at the start of the pandemic (March 2020). In regional areas, values are even higher, at 32.2% above pre-COVID levels.

Corelogic Annual Trough to Peak Growth & Decline Index
Corelogic Annual Trough to Peak Growth & Decline Index
Corelogic Annualized Home Value Index By Region
Corelogic Annualized Home Value Index By Region

With stabilizing home prices, slowdown of cash rate hikes, a robust labor economy, and soaring rental prices, the property investment landscape is brighter than it looks on the surface for buyers in 2023. 

As economic conditions improve, first-time homebuyers and investors alike will have increased opportunities to find the perfect home to establish stability and security or to build wealth through rental income.

Things To Consider Before Investing

When purchasing a property, it is essential to be aware that you may have to put down a cash deposit of 15-20% of the cost. Paying 20% or higher upfront will prevent you from paying for Lender’s Mortgage Insurance (LMI). saving costs in the long run. There are additional expenses to prepare for, such as settlement costs, legal fees, stamp duty and mortgage establishment fees, and these fees will vary according to the state you are purchasing from and your chosen mortgage lender. Furthermore, to ensure that you have accurate insight into the associated costs and monthly payments before taking the plunge, it is also advised to talk to your mortgage broker and obtain preapproval.

When you decide to make your property purchase and it comes time to acquire and manage your investment, it’s important to work with serious and experienced professionals who understand the ins and outs of property investing. This can include an Accountant, or dedicated Tax Accountant, who can help you navigate the complex tax laws surrounding property investing.

If you’re an enterprise investor, working with an SMSF Accountant or Small Business Advisor is highly suggested best practice, especially if you’re planning on using your self-managed superannuation fund (SMSF) to invest in the property. Assembling a team of exceptional professionals can help you structure your SMSF in a way that maximizes tax benefits and protects your assets.

As a property investor, you’ll also want to work with a Business Advisor or Business Accountant who can help you identify the best properties to invest in, manage your finances, and plan for the future. These professionals can also help you to stay compliant with laws and regulations, and ensure that your investment is well protected.

Conclusively, If you want to optimize your property taxes, you should engage with a Property Tax Specialist or SMSF Tax Specialist. As experts in property tax codes and SMSF regulations, they can help you minimize the amount of tax you pay on your property investment, which can free up working capital so you can continue to grow your portfolio. 

In Closing

In summary, as we exit the wild ride known as the 2022 housing market, 2023 bodes well for investment opportunists ready to take advantage of an economy that is turning the tide, and a housing market with stabilizing interest rates. 

Conversing with a financial consultant, mortgage broker, and tax professionals about available opportunities, such as pre-approved home loans or other types of funding, and tax benefits, could be advantageous. With the proper knowledge, guidance and understanding, first-time home buyers would be in an advantageous situation to purchase their perfect house, and investors would be able to purchase better properties for affordable prices.

Make sure you build your dream team of Accountants, Small Business Advisors, and SMSF specialists so you can source, acquire and maximize the perfect property investment.

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