After a boom period in which Australian properties soared in value by +28.6 per cent, 2022 presented a more challenging environment for sellers. Now in 2023, there could be another momentum shift beginning.
Interest rates have climbed sharply and prices have fallen from their peak levels, yet February and March have brought surprisingly positive results in many markets. Clearly, there’s a lot to consider for anybody thinking about listing their home.
Is it best to take advantage of the current conditions that have become advantageous to sellers? Or is there value in waiting to see how the market holds up?
Whether you choose to sell isn’t just about current market conditions, but also the urgency of your own personal circumstances. For some of us, we needed to upsize into a bigger property yesterday, while for others, waiting for the market to rise might be a good incentive to release more capital before retirement.
Let’s explore the current real estate climate, the pros and cons of waiting versus selling now, and what economists believe is on the horizon for 2023 and beyond.
The current state of the market
According to the latest CoreLogic data, Australia’s property downturn halted and reversed in recent months. March’s +0.6 per cent change in median prices was the first growth on a national level seen in 10 months.
Sydney and Melbourne, which both kickstarted the downturn, have flipped back to positive month-on-month growth. Brisbane and Adelaide look to have flattened out for the time being while Perth is once again on the up.
Darwin and Canberra posted moderate declines in March, leaving Hobart as the only capital city to come close to a full percentage point of negative growth for the month.
Regional markets, which have looked to have greater resilience to rate hikes, also ticked back into the green.
On an annual basis, units have broadly outperformed houses, a trend that could continue in 2023 as immigration boosts demand, investors capitalise on a tight rental market, and buyers shift their search due to reduced borrowing power and poor affordability.
That said, the return to growth for Sydney and Melbourne has seen houses outrunning units. It remains to be seen whether that will become a new trend.
It’s critical to remember that the recent price drops come after a historic period of growth, and the vast majority of locations around Australia still have a significantly higher median price than pre-Covid.
Australian property market forecast
The question of when interest rates finally peak looks closer to being answered.
The big four banks have all aligned on their forecasts, expecting that the cash rate will peak at 3.85 per cent after one last hike in May.
They each agree that rate cuts could also be on the cards as early as late-2023, too. So what does it all mean for property prices going forward?
Again looking to the big four, the latest forecasts show further declines as the year moves on, so the downturn may not be over just yet.
The banks’ forecasts are notoriously conservative, though, and the last time they predicted a decline of that magnitude was in the early days of the pandemic. As it turned out, they couldn’t have been more wrong.
SQM Research’s Managing Director Louis Christopher presented a range of scenarios for 2023 in his latest Boom Or Bust Report and has already ruled out the worst-case outcome.
Following the RBA’s decision to pause rates in April, Mr Christopher declared that “the market is going to recover, driven by the Sydney housing market.”
His three remaining scenarios suggest overall price growth is now likely in 2023.
~”There will be more first home buyers in the marketplace looking to get out of the rental crisis. Once there is more evidence the downturn is over, property investors are going to jump into the market, looking for their hedge against inflation.”
He added that he expects the big banks to quickly revise their forecasts to reflect a more optimistic attitude about the year ahead.
What are the upsides in the current market?
Media headlines have been persistently negative throughout the property downturn, and it’s easy to let that colour your perspective on the market.
Perspective is everything, though, and there are a number of positives that are worth considering when thinking about whether or not to sell.
Firstly, prices have fallen from a record-high peak. The majority of sellers will have made substantial gains over the past few years, and what’s been lost since peak levels is still only taking a small bite out of that historic boom for the most part.
Secondly, a downturn may be welcome news for sellers who are also buying, particularly upsizers.
A cooling market likely means a smaller price gap between your current property and the next one, making the leap to upsize more achievable.
BuyersBuyers co-founder Pete Wargent explained, “the cost, time, and stress involved due to the market conditions over the past couple of years prevented many from upgrading.
While buyers may have been approaching the market with some caution, demand could also be buoyed by renewed investor activity as rental yields increase and immigration promises to further tighten rental vacancy rates.
Listings remain well below average across the country, and that shortage of stock is helping to safeguard against deeper price falls as buyers have difficulty finding quality properties on the market.
Lastly, it’s worth remembering that if you’re selling and buying in the same market, any perceived losses that may be sustained on the selling side are likely to be recouped on the buying side.
Should I sell my house now or wait?
If you’re still on the fence about selling, we get it. It’s a huge decision that deserves all your careful consideration weighing up the advantages and disadvantages for either scenario.
Even if the market feels uncertain, it’s important to remember that it’s all relative and the market doesn’t stop. There will always be properties being listed and buyers out there wanting to purchase a home.
It’s also crucial to recognise that conditions will vary from suburb to suburb, so it’s important to understand your own local market — and to do that, you really need to get granular.
Whether your property is impacted by price gains or falls depends on many factors including location, property type, and whether your home falls into the higher or lower end of the market.
If you’re seriously considering selling your home, you need to do your research. As a first step, get a ball-park estimate of what your home might be worth by using a free online estimation tool.
Speaking to a top local agent is also one of the best ways to get a thorough understanding of how buyers are behaving in your suburb, what kinds of results are still being achieved, and what the best strategy could be for you to still get that dream sale result.