With industry experts calling last drinks on our nation’s current property boom, here’s why Australian house prices are expected to fall within the next year.
While the past twelve months have not been so great for the average first home buyer, sellers have had extremely favourable conditions to work with. In 2021, capital city buyers across the nation forked out an average of $1,066,133 to buy a house. This represents an annual increase of 25.2% and a quarterly rise of 6.5%, with the latter demonstrating that the market bounced back in a big way at the end of the year following months of uncertainty linked to ongoing lockdowns and travel restrictions.
However, even in the world of real estate, what goes up must come down. Despite whispers of interest rate hikes hitting Australians by the end of the year, real estate industry experts believe house prices are set to finally fall in 2023. The real question is, how much can we expect the market to drop by?
What Will Cause House Prices To Finally Fall
Once the Reserve Bank lifts the cash rate – predicted to be as early as June, or as late as 2023 – home buyers will be able to borrow less, which could constrain how much they can bid at auction and therefore push prices down.
In addition to our international borders opening up and a change in our recent conservative spending habits, buyer demand is predicted to fall. Like anything, it’s this demand that often influences price, which is arguably one of the primary reasons why Australia’s house prices have been running red hot over the course of the last two years.
Despite the Reserve Bank holding off on any changes to the cash rate for now, the big banks have already started to roll out changes to their interest rates across the board. While the record lows were never a sustainable option for the long term, many homeowners have been flocking to fix their interest rates for the maximum duration possible in order to try and protect themselves against the inevitable rises.
In simple terms, the strong growth seen in 2021 is starting to plateau. Higher mortgage rates, constrained affordability, and a clampdown from the bank regulator has already reduced the maximum amount buyers can borrow, with ANZ predicting that the average capital city house prices are set to rise by 8% this year, before falling to 6% in 2023.
While house prices will by no means crash in the immediate future, the property landscape will certainly change when the RBA eventually opts to lift the cash rate. However, as changes to the cash rate flow through to other interest rates in the economy and influence a wide range of economic activity and inflation, Governor Phillip Lowe has stated on multiple occasions that the RBA is unlikely to make significant changes until Austalians start to see real wage growth to combat the rising cost of living.
However, the RBA also announced that it will stop buying government bonds from February 10, thus ending additional monetary stimulus. This is arguably the biggest indicator yet that our economy is pivoting to post-pandemic stability, which will eventually have a flow-on effect into the property market. As our nation and our economy moves out of survival mode, it’s simply a matter of time before house prices reflect this.
Should you be looking to sell your home or purchase a new one, enlisting the services of a free property advisor like ESPA can often be a game changer. As an example, your advisor would likely research the property, local agents, check the zoning, evaluate market conditions, and communicate clearly with you regarding all of your options – but where do you find one?
Take The Stress Out Of Selling Property
As a completely free service, Emergency Services Property Advisors provide property advisor services to Police, Fire, Ambulance and S.E.S personnel and their families right across Victoria.
Luke and the team at ESPA are passionate about providing support to some of Australia’s most valued public servants. Along with key industry insights, ESPA also works with a broad range of service providers linked to the real estate industry such as conveyancers, trades, legal practitioners and mortgage brokers.
If you are an emergency services worker looking to potentially buy or sell property in the future, please get in touch with Emergency Services Property Advisors today to discuss how we can turn your real estate dreams into reality, or call Luke directly on 0414 757 705.
