Property recovery forecast for 2023: why Sydney prices will rise again

By Aidan Devine

Sydney’s ailing housing market will bounce back next year with price growth that will lead the country, new economic modelling has revealed.

SQM Research’s annual Housing Boom and Bust report released Tuesday showed Sydney prices were primed for growth over 2023 due to an increase in underlying demand for housing.

The base forecast by the property research group, which has a strong track record for predicting price changes, was for Sydney price growth to be 5 to 9 per cent over 2023.

MORE: New beaches home record set

This level of growth would make Sydney the strongest capital city housing market after a year of being the weakest, with city prices dropping by an average of nearly 7 per cent over 2022.

SQM Research director Louis Christopher said factors that would drive up demand for Sydney real estate next year included a rise in overseas arrivals, rental accommodation shortages and a robust city economy.

He added that the economic outlook for the country was healthy and there was little prospect of mass forced property sales – the kind that would cause a housing market collapse.

“No doubt it will be a very challenging year for the RBA to walk their tightrope and pull off a soft landing for the Australian economy,” Mr Christopher said.

“However, contrary to current popular opinion, I believe they will manage to do just that.”

Australia’s strong economic links with Asian tiger economies and careful fiscal management by the Reserve Bank suggested an economic slowdown rather than a recession, Mr Christopher said.

“That is not to say it won’t be a close call. No question, there will be major uncertainties, for which we have also published scenarios for. The key in our view is where the peak in the cash rate will be.”

SQM’s base forecast assumed the Reserve Bank of Australia eventually put a brake on interest rate rises, was somewhat successful in taming inflation and unemployment remained low.

Included in the assumptions was that interest rates peaked at no higher than 4 per cent (the cash rate is currently 2.85 per cent).

“If the target rate stays below 4 per cent, then it is unlikely we will have a flood of forced sales in the housing market,” Mr Christopher said.

“There is of course a risk the RBA may need to go further. If they do then the risks of a hard landing in the economy do substantially rise and thus, a hard landing in the housing market would also occur.”

Mr Christopher said parts of the Sydney housing market appeared to already be on the road to recovery.

“There have been signals that Sydney’s eastern suburbs has entered into this recovery, particularly for freestanding houses.

“It is also noted, that on SQM’s leading indicators, there has been a moderate rise in the auction clearance rate for Sydney, particularly for Sydney’s eastern suburbs.”

It comes as Reserve Bank governor Philip Lowe apologised to Australians who may regret taking out a home loan off the back of guidance that interest rates would remain unchanged until 2024.

Appearing before a Senate estimates hearing on Monday morning, the governor said it was “regrettable” that the RBA did not make it clear the commentary was conditional on the state of the economy.

“I’m sorry that people listened to what we said and then acted on that and now find themselves in a position they don’t want to be in,” he said.

SQM’s Housing Boom and Bust report included three additional scenarios for 2023 price changes based on interest rates, inflation and unemployment, among other factors.

In a worst-case scenario for homeowners – where interest rates climbed well above 4 per cent, unemployment surged and inflation surpassed 8 per cent – property prices would drop 3-8 per cent next year, SQM noted.

Another prediction, described as a “Goldilocks” scenario, would see the Reserve Bank cut interest rates in the second half of 2023 after successfully pulling down inflation. Were this to happen, property prices would rise 8-12 per cent.

Were inflation to calm down in the first half of 2023, only to accelerate again in the second half of the year, forcing the Reserve Bank to make bigger interest rate rises, the forecast was for 0-4 per cent growth in Sydney property prices.


Startling numbers put housing market correction and gloomy headlines in perspective

By Shannon Molloy,

New data released today has put Australia’s current property market correction and gloomy media headlines in stark perspective.

Nationally, property prices have fallen 3.53% from their peak in March, while across the combined capital cities they are now down by 4.38%.

The sharpest declines have been seen in Sydney, with prices slumping 6.28% from their peak, followed by Melbourne, with a 4.75% fall from its peak.

But new analysis by PropTrack of price growth movement since the start of the Covid pandemic in March 2020, when most markets began to surge, shows markets are still well ahead.

“Rising interest rates since May have constrained buyers and this has caused property prices to decline in most markets,” PropTrack economist Anne Flaherty said.

“But in the majority of areas, the price falls we’ve so far seen remain well below the enormous gains recorded since the start of the pandemic. For example, across the capital cities, prices are still up 24% and in regional areas, they remain a whopping 47% higher.”

Take the suburb of Austral in Sydney’s southwest, where the current median house price of $1.01 million is a staggering 142% higher than at the start of the pandemic.

Or, also in New South Wales, Greta in the Hunter Valley has a current median house price of $888,000, which is a whopping 130% higher than when Covid kicked off.

“NSW has seen the most high-growth suburbs,” Ms Flaherty said. “Topping the list for price growth in the state are suburbs in outer Sydney, as well as lifestyle-rich regional areas.”n every state and territory, recent price corrections pale in comparison to the significant value growth recorded in the wake of Covid in top performing suburbs.

For example, in Victoria, the median house price in the Mornington Peninsula suburb of Blairgowrie is 84% higher, sitting at $1.695 million.

Meanwhile in Queensland, Upper Caboolture, north of Brisbane, has a median house price of $754,000, which is 84% higher than in March 2020.

Apartment growth has been just as strong in many suburbs, with the West Australian suburb of Cable Beach in Broome seeing a 126% surge in its median unit price of $362,000.

In Narooma on the NSW South Coast, the median unit price has shot up 115% to reach $618,000, while in Sunshine Beach in Queensland it’s up 104% to $1.6 million.

“Many of the suburbs that have seen the largest gains since the onset of the pandemic are in scenic, lifestyle areas,” Ms Flaherty said.

“For many Australians, Covid led to a rethink in how and where they want to live. Then, the rise in remote working enabled many to move further away from capital cities.

“Because of this, many sea- and tree-change suburbs saw buyer demand surge, accompanied by strong price growth.”

Top performers in New South Wales

Another trend that sparked strong demand and steep price growth was the desire for more room to move, be it a larger dwelling, bigger backyard, or less dense suburb.

Alongside Austral, another outer Sydney suburb that saw big gains is Box Hill in the city’s west, where the median house price of $1.27 million is now 125% higher than at the start of Covid.

Local agent Binnie Jaura from Ray White said despite the sharp rise, the area still appeals to first-home buyers chasing a lot more bang for their buck.

“Stock levels are significantly lower than a year ago, yet buyer demand remains strong,” Mr Jaura said.

“We are looking forward to next year as we already have multiple listings signed and ready to launch in the first month of 2023. The market is continuing to stabilise, which therefore assists us in achieving a higher price for our vendors.”

In the Southern Highlands hotspot of Berry, the chance to live minutes from the beach while being surrounded by rolling green hills, all an easy drive from Sydney, proved to be irresistible, local agent Jacqueline Crapp from Raine & Horne said.

“Now, with more flexibility with working from home, many are making the lifestyle move to the South Coast,” Ms Crapp said.

As a result, there has been a 133% explosion in the median house price since Covid, now sitting at $2.275 million.

During the pandemic, high demand and very low supply saw prices surge, and while things have cooled in recent months, she said buyer interest is still strong.

“Stock numbers in Covid were under pressure and at any given time the whole market only had 20 or so properties on offer. The Berry region now has more than 80 properties on the market, with a good offering across all price points.

“Days on market are now longer and buyer urgency has disappeared. Wet weather and negative media have certainly not helped this at all.

“But I think the market will find its new norm next year. Interest rates will cease increasing hopefully in the not-too-distant future and buyer confidence will creep back in.”

The increasingly popular coastal town of Yamba in the Coffs Harbour region has been touted as a future Byron Bay, as sea-changers and weekenders seek more affordable seaside options.

That’s helped to drive an 81% increase in its median unit price, which is now $775,000.

Local agent Daniel Kelly from Ray White said its world class beaches and surf breaks, family friendly atmosphere and fantastic restaurant scene had seen buyers flock to Yamba.

“We are incredibly lucky to be a relatively small town that offers just the right amount of atmosphere and the perfect coastal lifestyle,” Mr Kelly said.

“Since Covid, our town has seen a significant increase in demand as people sought a sea-change, and relative to other coastal areas, Yamba is quite affordable.”

The market recently has “normalised” with steadier conditions and more consistent sales results, he said, but many buyers remain active on the ground. Next year will likely see “more of the same”.

A regional lifestyle with plenty of outdoor recreational amenities has also seen the alpine locale of Jindabyne rocket up the list of sought-after suburbs in NSW.

Since the start of the pandemic, the median unit price in the Snowy Mountains town has leapt by 113% to reach $810,000.

An array of winter and summer activities, a friendly atmosphere, an abundance of natural beauty, and quick access to the South Coast make it a popular choice for buyers, local agent Michael Henley from Henley Property said.

“There has been a huge migration to our town from all over Australia and a few from around the world,” Mr Henley said.

Jindabyne has also been designated a Special Activation Precinct by the NSW Government, sparking significant planned investment in facility upgrades and development.

According to the Department of Planning and Environment, SAPs benefit from projects to “attract and grow businesses, provide more employment opportunities, and stimulate the regional economy”.

“It will leverage the region’s environmental, cultural, and landscape attributes and establish Australia’s alpine capital as a resilient year-round tourism destination,” the Jindabyne SAP reads.

Top performers in Victoria

No-one in the country had a Covid experience quite like Melburnians, who endured several long and painful lockdowns and some of the toughest restrictions in the world.

That inspired hordes of people to get out of town when they could – and it seems many wound up in the Mornington Peninsula.

“In Victoria, suburbs along the Mornington Peninsula have seen the strongest price rises post-Covid,” Ms Flaherty said.

Somers is “the ideal coastal village”, local agent Jackie Wright from The Coast Real Estate said, with a quaint and peaceful feel and spectacular natural amenities.

Since the onset of Covid, the median house price there surged by 98% to reach $1.82 million.

“I think people must have sat at their computers during lockdown and looked where they could drive an hour from Melbourne, with Somers obviously the top result,” Ms Wright said.

The pace is somewhat more relaxed than glitzier Mornington Peninsula suburbs, with no local postal delivery service harnessing a village feel, she said.

“The hub of the community is the [general] store and post office. A morning walk to collect your mail will often lead to catching up for a chat and a coffee with friends. People love the quirkiness of that.”

Ms Wright expects the market to settle over summer and the start of the New Year before ramping up again in autumn, as it tends to do each year.

The community feel of the leafy inner-city suburb of Blackburn saw buyers flock to it over the past few years. Its median unit price leapt by 53% to hit $868,000.

Local agent Rachel Waters from Woodards said the area appealed to older downsizers, first-home buyers and young families because of its safe and friendly feel.

“Blackburn has an active community and offers good schools, shops, and transportation,” Ms Waters said. “More than ever before, buyers see value in accessibility to parkland and walking tracks – for example Blackburn Lake or the Bellbird area.”

Apartments with a study or extra bedroom to allow people to work from home have been especially popular.

“After several rate hikes, we’ve found that those taking out a mortgage have less to spend on their home, but this hasn’t stopped many from continuing their search for the right property at the right price,” she said.

“We may see some price adjustments if interest rates continue to go up, but the Blackburn market continues to be a popular choice for those looking for a reliable investment in a convenient location.”

Top performers in Queensland

On top of the desire to be closer to nature, southeast Queensland’s housing markets had to contend with an unprecedented influx of arrivals from interstate during Covid.

Many of those buyers went straight to the Gold Coast, with the picturesque suburb of Mermaid Beach seeing its median house price leap 110% to $3.32 million.

Local agent Guy Powell from Harcourts Coastal said development restrictions limiting building heights to 15m, or three storeys, set the suburb apart from the rest of the region.

“It can’t get overdeveloped, helping Mermaid Beach keep its community spirit and coastal charm, Mr Powell said.

“It’s a family friendly environment, it feels grass roots. We’re built around the sand and sea, but in the past 10 years the coffee culture and hospitality scene has really stepped up.”

Before Covid, the entry level price for a small, original condition house was about $1.3 million, whereas now it’s in the mid-$2 million range, he said.

“Covid really put the GC on the map and work from home, locked borders, and no international travel only shone a torch and highlighted the life we get to live here.

“As of lately, there are some beautiful new builds and projects coming up to completion or being completed, redefining the area and further cementing Mermaid Beach as one of the Coast’s most sought-after suburbs.”

Some of the heat has come out of the market in Mermaid Beach, as it has across the Coast, with buyer demand easing. But Mr Powell said stock levels remain tight, which he believes will see the suburb “hold and retain its value”.

“A lot of owners are high net worth individuals who don’t or won’t have to sell should 2023 become an interesting year. The area and location itself will always be really sought-after and weather any storm well.”

In the Redcliffe region, northeast of Brisbane, the suburb of Woody Point has been in demand with those searching for an affordable unit in a peaceful location.

The median unit price is now $611,000, which has surged by 53% since the onset of Covid.

“People love the relaxed village lifestyle on offer in Woody Point, while holding onto the convenience of being only a short commute to the Brisbane CBD, international airport, or the Gold Coast and Sunshine Coast,” local agent Damien Misso from Ray White said.

“Covid was a boon for Woody Point as people sought to escape the CBD but keep proximity. When you were only allowed to travel a short distance from home, people realised being here was a good option.”

More recently, the market has settled from the peak of early 2022, but Mr Misso said people are still drawn to the “natural wonder” of Woody Point.

“In my opinion, I see a lot of opportunity in the next phase of our market and those who are prepared will be the ones who benefit the most,” he said.

Top performers in South Australia

Adelaide’s top performer since Covid is the prestigious suburb of Beaumont, where the median house price skyrocketed by 82% to $1.64 million.

Local agent Brandon Pilgrim from Ray White said the desire for large, well-designed family homes on big blocks saw buyer demand go through the roof.

“On top of that, Beaumont offers arguably the best local school zones in the state, being dual zoned with the very desirable Linden Park Primary School and Burnside Primary School, and the high school being the prominent Glenunga International High School,” Mr Pilgrim said.

“Not to forget that Beaumont is sitting on the ledge of the Adelaide foothills offering high-quality family homes with panoramic views across the city.”

The picturesque pocket is also surrounded by an array of quality restaurants, cafes and shops, and is a short drive to the CBD, he added.

“It has continued to remain the destination to live and raise your family and although interest rate rises have dampened the growth in the area, we are still finding the market buoyant,” he said.

“I think Beaumont will always have higher buyer demand than most of Adelaide. We predict that the market will be steady for the next two years while inflation levels out.”

Top performers in Western Australia

A yearning for a home near the water wasn’t confined to buyers in the country’s east, with Perth property hunters flocking to Bicton on the Swan River.

The median house price there rose sharply by 72% to hit $1.5 million since the onset of Covid.

Local agent Ben Stott from Ross & Galloway said the suburb’s prized position made it a hotspot when the Perth market began to move in September 2020.

“It was like a switch was flicked and the market went crazy,” Mr Stott said. “I was receiving multiple offers on homes with many going well over expectations with nearly all listings selling in week.”

As well as its riverside position, Bicton boasts some amazing natural amenities including Blackwell Reach, Point Walter Reserve, Bicton Baths, and Point Walter Golf Course.

It proved particularly popular with families, with well-presented homes on good-sized blocks selling the best, he said.

“In the past few months, I am still seeing the same number of buyers coming to home opens but properties are taking slightly longer to sell, with still most selling within four weeks,” Mr Stott said.

“I honestly thought that the market would have had a correction by now, but we have a big supply and demand issue in Perth. I think prices will just stay steady for the foreseeable future.”

n the other side of the city in Perth’s southeast, the affordable suburb of Armadale has seen strong demand for units. The median unit price jumped by 60% since the onset of Covid to reach $270,000.

“Armadale offers affordable living for homeowners and great rental returns for investors,” local agent Ashley Swarts from O’Neil Real Estate said.

“For the past two years, most of our buyers locally were from out of area, with plenty of sales going through without the buyers even personally inspecting the property.

“We had buyers from Sydney, Melbourne, Queensland, and even Tassie pulling equity out of their homes to buy investment properties here. With record low vacancy rates, rents are still very high, and investors are getting great returns.

“Homes are now taking longer to sell, and buyers are getting fussier,” he said. “They want a premium home so anything that needs work typically sells for a discount, while well-presented homes are fetching good money.”

Top performers in Northern Territory

With the international border closed and many states shutting down to the rest of Australia, the Northern Territory provided something of a Covid escape for much of the pandemic.

Susie Patton-Quinn from Real Estate Central said a number of those interstate tourists hit the Top End and fell in love, deciding to uproot and relocate permanently.

The popular up-market suburb of Muirhead in her patch proved particularly popular with all buyers after the onset of Covid. Its median house price surged by 114% to hit $754,000.

“Muirhead is a very popular up-market suburb that’s highly sought after by families and professionals, particularly medical staff and academics, due to its very close proximity to Royal Darwin Hospital and Charles Darwin University,” Ms Patton-Quinn said.

The market has slowed in recent months after a “frenzy” for much of the past year-and-a-half, she said.

Despite that, there are many long-term growth drivers for Darwin, with the Territory Government investing significantly in projects to drive economic expansion.  

“There’s so much positivity on the horizon, from gas, solar, shipping and mining projects, to major defence investment, and even NASA’s involvement in the Arnhem Space Centre,” Ms Patton-Quinn said.



Australia to fall 30,000 builds short of one million homes budget pledge

By Nathan Mawby, Property journalist

Australia’s peak housing group has warned the government and Reserve Bank are headed into conflict over a federal budget goal to create one million new homes in five years.

New forecasts by the Housing Industry Association have calculated construction will commence on 970,720 new homes in the five years ending in 2028, missing the ALP’s five-year target.

They are contained in HIA’s National Outlook Spring 2022 report, which was released at a breakfast event in Melbourne last week — along with an opening statement that highlighted the competing agendas.

“The RBA and the government have gone head-to-head with ambitious, and conflicting goals,” it read.

It warned further rate hikes could see the almost 30,000 home shortfall blow out even more.

“If the RBA continues to increase the cash rate in 2023, this forecast will be downgraded, and the challenge of building one million homes will become increasingly difficult,” the report said.

HIA senior economist and report co-author Tom Devitt said the goals “seem to be at cross purposes”.

“But even though they do appear to be conflicting on that front, there are other tools at the government’s disposal,” Mr Devitt said.

He said one option would be to provide grants to local governments that expedite land releases to effectively reduce prices and encourage house and land purchases.

The HIA report indicated Australia has built more than one million homes in a five-year period on the past, but noted the achievement in the half-decade ending in December 2018 was heavily buoyed by an unprecedented apartment boom.

The industry group anticipates multi-unit construction will increase by more than 10,000 homes a year from 73,920 starts in 2022 to more than 85,500 in 2024.

The report suggested a notable upswing in these figures would be need to be achieved to reach the one million homes target in time for the government’s December 31, 2028, deadline.

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HIA figures also show that while Victoria has lead the nation’s housing construction since 2019, it is expected to slip behind NSW next year.


The insider trick for home buyers trying to plan for higher interest rates

By Elizabeth Redman

Home buyers are wondering: how high will interest rates go? Economist forecasts differ, but mortgage brokers are advising clients on a way to plan ahead.

Look at the fixed rates banks now offer for a guide to how mortgage rates will likely track during that fixed-term period, say brokers.

Once potential buyers consider the rising cost of mortgage repayments, some choose to reduce their expectations and borrow less rather than be saddled with a large debt.

“Everyone asks, that’s for sure – everyone that’s taking on debt is keenly interested in what their repayments will be,” said 40Forty Finance director Will Unkles, who specialises in first home buyers.


“I always refer clients to look at the fixed rates banks are offering for certain terms and use that as an indication of where the bank thinks interest rates will sit.”

Unkles produces a worksheet to show clients what their repayments would be if interest rates rose as expected or in a worst-case scenario.

Banks also assess new clients with a three percentage point buffer, so someone borrowing at 4.5 per cent will be examined to see if they could repay the loan at a rate of 7.5 per cent, he said.

“In the last six to 12 months we’ve seen a range of clients choose to reduce what they’re willing to borrow

Atelier Wealth managing director Aaron Christie-David said banks are advertising where they think interest rates will go in coming years through their fixed-rate pricing.

“The house always wins,” he said. “The banks have got a lot of data; they’ve got a lot of experts on their team.

“I call it a soft signal – this is where they think the rates expectation is going to get to.”

on account of that interest rate stress coming into their cashflow.”

Christie-David said that as interest rates rise, buyer borrowing capacity falls, but prices for top-quality properties have not fallen as fast as borrowing capacity.


Some buyers who are more budget-conscious are happy to wait and see, especially if they are feeling the pinch of rising living costs, or to look at properties in need of renovating or that are less in demand, he said.

The warnings come as economists offer a wide range of forecasts for the interest rate peak this cycle.

Commonwealth Bank has the lowest forecast, tipping a peak cash rate of 3.1 per cent to be reached at the Reserve Bank board’s next meeting in a fortnight, while Westpac predicts further hikes that would take the peak as high as 3.85 per cent.

Mortgage Choice Blaxland, Penrith and Glenmore Park principal Rob Lees said that aside from stress tests imposed by banks, buyers should add their own buffers to their household budget.


“I want them to add on at least half a per cent extra when they’re budgeting,” Lees said.

“I might even do a couple of little calculations too, some might be if it was half a per cent higher, or a per cent higher – just so they’re aware of what’s going to happen when the rates rise.”

An average client might only qualify to borrow $50,000 or $100,000 less since rates started rising, he added.

“They either increase their income, or they borrow less.”


Foster Ramsay Finance principal broker Chris Foster-Ramsay is fielding questions about interest rate expectations from existing borrowers, some of whom fixed at rock-bottom levels after the pandemic hit.

“[If] it’s someone coming off a fixed rate, they’re saying, ‘Gee whiz, what will it go to?’” he said.

“We would expect the fixed rate repayments that you’ve been paying to double, based on where the rates are.”

But he was trying to prepare these borrowers while mortgage costs were at record lows.

“If you then go back to the world record low of interest rates and play that out, we were absolutely giving advice of, ‘We’ll do 2.5 per cent now, but this is what it would look like at 4.’”

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