The Australian housing market outlook for 2023 and beyond is showing positive signs of recovery and growth following the recent cyclical downturn. This is indicated by stabilising or increasing housing values across the country, strong auction clearance rates, a boost in buyer sentiment, and home sales trending around the previous five-year average. This upward trend coincides with a surge in net overseas migration, projected to reach a record high of 400,000 this year. Domestic demand also remains high due to a trend toward smaller household sizes, necessitating more homes for the same number of people.
The National Australia Bank (NAB) has revised its expectation for dwelling prices, forecasting a slowdown in price growth in the second half of 2023 but ending the year approximately 4.7% higher. Despite numerous challenges including the economic fallout from COVID-19, multiple interest rate rises, low consumer confidence, and tighter lending restrictions, the Australian property markets (especially Sydney) have demonstrated resilience. The balance of supply and demand, alongside population growth, has significantly impacted dwelling values.
Statistics reveal that the national housing market is strengthening, with house prices rising over five consecutive months. Driving property price changes are several factors, including consumer confidence, supply and demand, and of course interest rates. The current demand for housing is booming, fuelled by a surge in migration and the return of international students. An estimated additional half a million people will need accommodation in Australia over the next two years, boosting competition in the rental market and indirectly inflating property prices. However, new home supply growth is lagging due to rising construction costs, labour shortages, and a decade-low number of building approvals.
The construction industry is wrestling with these issues, with several small and medium-sized construction companies collapsing due to a 25% surge in construction costs over the past two years. These costs are being passed on to homebuyers, further impacting house prices. Concurrently, wage growth and historically low unemployment have resulted in strong household incomes, enabling homeowners to weather interest rate hikes and continue purchasing properties.
Closer to home, Sydney’s property prices have surged in recent months due to an ongoing lack of supply. This supply issue is expected to ease over the coming months as we move into the traditional Spring selling season. Whilst we do not expect to see a downturn, prices will stabilise over this period and in the lead up to Christmas.
Our hopeful prediction is that the Reserve Bank of Australia (RBA) will cut interest rates before the end of 2023, which will foster a favourable environment for property prices, potentially resulting in a 10% rise through 2024 and into early 2025. This rise signifies a recovery of price falls from early 2022.
Overall, the Australian property market appears to be recovering, guided by various factors including interest rates, consumer confidence, supply and demand, economic conditions, and government policies. However, if interest rates continue to rise further in the coming months, the market could see a delay to this recovery phase of approx. 3-6 months.
If you have been thinking about selling your home but unsure of the timing, Book A Call with our Vendor Advocates to discuss your options and help you make the right choice. We provide advice on best ways to achieve the highest sales price as well as what to look for when choosing a real estate agent. Visit our website to find out more.