2023 property market forecast

BY GARETH KENT

Director, Preston Rowe Paterson Geelong

My closing article for 2022 addressed specific coming project announcements and the benefit they will have on the Geelong property market over 2023.

There are also some early indications of broader fundamentals that will affect our region’s market.

We have just come through a traditional Christmas/New Year, where we all took a well-earned break, and it’s very early to predict what will happen through 2023.

However, early indications show that the market is in a stall, and this is likely to hold through the early months of 2023.

As was predicted, the coastal market is experiencing a lift in listing numbers, dominating the upper end of the available stock on the residential market.

This is a traditional cycle, as local agents take advantage of the increased holiday populations.

Five times as many listings above $1.5 million are advertised in the coastal markets as opposed to the Greater Geelong region, however, we have not seen a sell-off of holiday homes, the majority of these advertised properties are permanent dwellings.

What should also be considered is the number of two to three-year fixed interest loans that will mature in 2023. Borrowers who fixed their rate at 2 per cent p.a. will now be required to pay at least 4.5 per cent p.a.

The RBA released the index of commodity prices on January 3 – the cost of commodities fell by 3.2 per cent predominantly across raw materials, agricultural and mining.

Inflation data from the US and Europe also showed a downturn in inflation at the end of 2022. However, our consumer price index (CPI – the measurement of inflation) rose to 7.3 per cent in November, up from 6.9 per cent, the December CPI result will be interesting.

Hence, although the signs of easing inflation are here, we will likely see at least one more rate rise. Of note is that one of the main factors in the CPI calculation is the increase in rent, up 5.6 per cent. One could argue that the rise in interest rates only makes it harder for people to buy a house and pushes more pressure on the rental market, fuelling inflation.

What this all tells me is, although the RBA is likely to punch out at least one more rise, the inflation figure will likely fall back relatively quickly to the targeted 2.3 per cent by the end of 2023, and the RBA may be forced to ease pressure on interest rates towards the end of the year.

Before this happens there is an environment for opportunity to be created. It is an established fact that people do not usually allow their housing debt to fall into bad debts, so we will see borrowers sell their homes that they can no longer afford, well before any easing in interest rates.

Stock levels should then start to increase through early-mid 2023. This will create an ideal climate for renters to re-enter the owner-occupied housing market, with their current rent equaling or being more than a mortgage payment.

This will create a feeding frenzy that will likely lift demand in consumer sentiment, giving the market confidence heading into what I predict will be a bumper spring season in September/October 2023, putting upward pressure on housing values. The opportunity is to buy, between now and then!

Additional opportunities should be found in emerging residential apartment markets within our region. If the government releases the Central Framework Plan, we will likely see many “off-the-plan” units come onto the market in early to mid-2023.

These will take 18 months to finalise, and a small deposit can be an ideal investment, giving you 18 months before the need to settle the sale. These are tremendous opportunities for either long-term holds or short-term investments, if you are cashed up.

Overall, I think 2023 will be an exciting year and will provide those astute investors and home buyers with a great opportunity. If you get your timing right, there will likely be some bargains and some money to be made!

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