The state of the Australian property market is a topic of conversation that we’re hearing and talking about more and more, and there’s a note of concern starting to creep in and rear its ugly head.

With interest rates going up and house prices heading in the opposite direction, what does that mean for you if you’re looking to sell, buy or invest in real estate in the next 12 months?

Well, the latest opinions from banks and experts in November 2022 are a little bit at odds.

The big banks expect 2023 to be a year of significant price decreases with all four major banks predicting falls – NAB expecting combined capital city prices to decline 11.4%.

Combine this with the rising cost of living and we can say goodbye – at least for a while – to the heady days of 2021 when prices on the property market soared to record highs.

Australian property market in 2022 – a changing landscape

After an incredible boom the Australian property prices started to roll over in June 2022 led by Sydney, which fell for the first time in two years – 2.7 % over the June 2022 quarter.

Source: CoreLogic index, rebased to 100 5 year ago, updated daily, 25th April 2024

Prices are falling across all cities, with the number of days since the peak and the percentage fall outlined below.

Source: CoreLogic Index, updated daily, 25th April 2024

Considering the interest rate predictions of the big four banks, it’s easy to see how that note of concern we mentioned at the beginning is starting to creep in.

It’s a long way from the last quarter of 2019 which saw a 4% growth in national average house prices and the real interest rate hovering around 1.5%.

But don’t stop reading just yet…

National property market forecast for 2023 – what can we expect?

The latest report from property analysis firm SQM Research has shown that, in fact, Australian house prices will rise next year if the Reserve Bank pauses rate rises and inflation drops.

SQM Research’s Housing Boom and Bust Report for 2023 forecasts capital city house prices will rise between 3% and 7% dependent on interest rates not going above 4%, inflation dropping to 5%, and unemployment staying below 5%.

This is in contrast to an earlier analysis by PropTrack showing house prices are expected to continue to fall across the country throughout 2023, including regional areas which have remained up almost 50% since the start of the pandemic.

Markets will take time to adjust to “sharply higher interest rates, as well as ongoing uncertainty about the peak for borrowing costs”.

According to a RateCity.com.au analysis of ANZ’s property price forecasts based on CoreLogic’s adjusted median values from December 2021, the national median house price could fall by around $150,000 by the end of next year (minus 9% in 2023).

On the interest rate front, the Reserve Bank of Australia (RBA) has forecast that borrowers with fixed-rate loans that are due to expire by the end of 2023 would experience a hike of around $650 – or 45% – to their monthly repayments.

What are the experts saying?

Adelaide Timbrell, Senior Economist at ANZ, says the decline in housing prices is not due to rising distress for borrowers but rather, reflects lower borrowing power.

“Over the next 18 months or so, when a borrower seeks a loan, they will be assessed at a higher interest rate than before, and with higher living costs. That translates to the maximum amount they can borrow being lower – and that means house prices will fall back as people have less to spend.

“Meanwhile, higher cost of living pressures also play into how much people can borrow and hence how much they can pay for a house.

It’s not that we expect to see a lot of houses coming up for sale because of people not being able to afford their mortgages.

It’s more about not being able to borrow as much because interest rates are higher and prices of essential goods and services are higher as well.

“People are still looking to buy homes.

“With such a strong labour market, there are lots of willing buyers who have jobs and we expect better pay rises than what we’ve seen in recent years.

“But they still won’t be lent what they might have been lent even six months ago.”

What’s the property forecast for your State in 2023?

ANZ forecasts property prices to fall considerably across the country in 2022 and 2023 with a small rebound in 2024.

	2022 Forecast	2023 Forecast	2024 Forecast
Australia	-8%	-9%	5%
Sydney	-14%	-6%	6%
Melbourne	-11%	-6%	6%
Brisbane	1%	-12%	5%
Adelaide	4%	-17%	2%
Perth	1%	-12%	3%
Hobart	-9%	-8%	4%
Darwin	0	-12%	3%
Canberra	-7%	-9%	4%

Source: RateCity.com.au. ANZ property price forecasts, CoreLogic index-adjusted median values, 31 December 2021 and 31 July 2022.

Sydney Property Price Forecast 2023

Sydney’s property prices are forecast to fall 6% in 2023, after already falling 14% in 2022.

In 2023 the expected median house price is $1,141,650 and median unit price is $978,800.

“Sydney’s housing market has so far defied expectations by outperforming most markets, despite being a relative laggard through the economic recovery and overexposed to the current loss in overseas migration. With housing affordability now worsening and first home buyers showing signs of being priced out of the market, the bulk of these gains have likely now been realised.” QBE

Sydney’s 12 month price trend is shown below

Source: Corelogic

Canberra Property Price Forecast 2023

Canberra’s property prices are forecast to fall 9% in 2023, after already falling 7% in 2022.

In 2023 the expected median house price is $871,949 and median unit price is $688,200.

“The return of international migration is expected to lift underlying demand in 2022/23, however this will mainly benefit the unit market. Combined with lower completions and further gains in the labour market, this will help to maintain some house price growth despite rising interest rates.” QBE

Brisbane Property Price Forecast 2023

Brisbane’s property prices are forecast to fall 12% in 2023, after rising 1% in 2022.

In 2023 the expected median house price is $719,669 and median unit price is $503,200.

“Despite large gains over 2020/21 and 2021/22, Brisbane will remain relatively affordable when compared to Sydney and Melbourne, and the expected sustained net interstate migration inflows will help to prevent a sharp slowdown in momentum in 2022/23 and 2023/24.” QBE

Brisbane including the Gold Coast’s 12 month price trend is shown below

Source: Corelogic

Adelaide Property Price Forecast 2023

Adelaide’s property prices are forecast to fall 17% in 2023, after rising 4% in 2022.

In 2023 the expected median house price is $539,542 and median unit price is $472,100.

James Trimble, General Manager at Raine & Horne Real Estate, has some words of advice for those looking to get into the South Australian market. “While the Adelaide market continues to outperform other capital cities, my view is that if buyers think that we’re in for a long-term real estate downturn, they must think again. In Adelaide, the market continues to tick along as genuine vendors continue to sell as genuine buyers compete for every property as mortgage interest rates are still relatively low,” he said.

Adelaide’s 12 month price trend is shown below

Source: Corelogic

Melbourne Property Price Forecast 2023

Melbourne’s property prices are forecast to fall 6% in 2023, after already falling 11% in 2022.

In 2023 the expected median house price is $836,809 and median unit price is $719,400.

“A number of factors are at play in the property market: the pull forward demand from HomeBuilder will have dissipated, many markets will have moved into fundamental oversupply, and rising mortgage rates (in time) together with recent and near-term price rises will crimp affordability. But the relatively modest pace of price rises over the last 12 years means affordability is still favourable, and Melbourne’s median house price is expected to rise 19% over the next three years.” QBE

Melbourne’s 12 month price trend is shown below

Source: Corelogic

Hobart Property Price Forecast 2023

Hobart’s property prices are forecast to fall 9% in 2023, after already falling 8% in 2022.

In 2023 the expected median house price is $648,310.

“Hobart’s heavy reliance on tourism and international students makes its economy severely exposed to the impacts of the COVID-19 pandemic. But the economy has been protected by the fiscal and monetary supports that have been put in place, and together with relatively little direct exposure to COVID-19, the state’s economy has been a middle-of-the-pack performer.” QBE

Darwin Property Price Forecast 2023

Darwin’s property prices are forecast to fall 12% in 2023, after holding steady in 2022.

In 2023 the expected median house price is $493,506.

Perth Property Price Forecast 2023

Perth’s property prices are forecast to fall 12% in 2023, after increasing 1% in 2022.

In 2023 the expected median house price is $498,468.

The June 2022 quarter result showed growth in Perth’s housing values, which were temporarily showing a second wind as state borders reopened, are again losing steam with values up 0.4% in June.

“Moving through the medium term, rising prices and interest rates will worsen affordability and dampen momentum, and this shift will be reinforced by a sharp rise in new supply, which will absorb a significant amount of the current demand.”QBE

Perth’s 12 month price trend is shown below

Source: Corelogic

In a nutshell, no, it’s not all bad news

Many experts predict when we come out of 2023, interest rates will have stabilised and there’ll be a lift in house prices in all of the capital cities in 2024.

In fact, rising wages and this easing in mortgage rates is expected to mean a 5% increase in housing prices that year.

Sally Tindall, RateCity.com.au Research Director, says it’s also possible that a rise in demand from people on the hunt for a good deal could turn the market around sooner than expected with investors coming back to the market early if rents continue to rise at the same time property prices fall.

Demand for housing finance among upgraders, movers and downsizers appears to be fairly resilient despite rising rates.

These forecast price falls should be viewed in the context of the very sizeable increases in property prices over the last few years.

Is it the right time to sell?

This will depend on your personal situation. If you are looking to receiving property appraisals or want to find out more about the market from your top local agents you’ve come to the right place.

Call our local expert team on 1300 665 557 or compare agents now to connect with experienced, local agents.

Sources: cover image @ayushjain