Is this the year to buy a property or sell your home? Experts give their verdict

By Shannon Molloy


Property experts have given their outlooks for the year ahead, forecasting when interest rates will stop rising and housing markets will begin to see price growth.

The overwhelming consensus is the Reserve Bank is likely nearing the end of its tightening cycle and that mid-term supply and demand fundamentals remain imbalanced.

While buyer demand is softer of late, the number of Australians looking to buy a home remains elevated.

And despite a fall in the number of new for-sale listings, the supply of dwellings across the country remains constrained.

What’s happening with prices?

Home prices have fallen in recent months and are expected to cool further throughout this year, but they remain significantly higher than pre-Covid levels.

At a national level, property values are down 4.51% from their March 2022 peak.

PropTrack director of economic research Cameron Kusher said values at a national level are projected to fall 7% to 10% in 2023.

However, home prices nationally surged by 34.7% from the start of the pandemic to the peak in March last year.

So, even if prices fall at the highest range of the forecast, national home values will still be a staggering 18% higher than they were pre-Covid, he said.

Some cities are also set to fare better than others, with secondary capitals forecast to see smaller dips in home prices.

Maree Kilroy is a senior economist at BIS Oxford Economics and said the pace of home price falls has clearly slowed in recent times.

Broadly, Ms Kilroy expects home prices will likely continue to soften for several months as the lagged impact of rate hikes flows through to the market.

But the price correction might be short-lived, she said.

“Our forecast is for the September quarter to represent the bottom for national property prices, with turnover beginning to improve soon after,” Ms Kilroy predicted.

“But some cities will recover earlier than others.”

The outlook for interest rates

Price falls have been driven predominantly by the Reserve Bank’s rapid interest rate hikes, in a bid to crush red-hot inflation.

Mr Kusher said one or two further rate hikes of 25 basis points are expected, and “thereafter we expect rates to remain on hold”.

And there’s potential for the RBA board to even begin cutting the cash rate again in late 2023 or early 2024, he said.

“We anticipate these further interest rate rises will push prices lower. However, a lower interest rate peak and earlier-than-expected interest rate cuts could ease price falls.​”

The annual rate of inflation in December was 7.8%, which was the highest level seen in decades, however, the quarterly measure was a little softer than expected.

Production costs have also eased, Mr Kusher said, adding more glimmers of hope on the horizon that extremely high inflation is finally being contained.

There are signs that consumer spending is coming off the boil, with NAB data released last week showing Aussies are making “thoughtful” budget adjustments.

Rachel Slade, the bank’s personal banking group executive, said four-in-10 consumers have reduced spending on entertainment, lunches and coffees, and cut the number of car trips they made.

Another third of consumers have scaled back holiday plans, cut back on spending on food delivery apps, or delayed a major household appliance purchase.

“Australians are now making small but thoughtful changes to their purchases to keep on top of increasing costs,” Ms Slade said.

Meanwhile, Ms Kilroy said she expects the RBA’s rate tightening cycle to “top out soon”, with the cash rate likely to peak at 3.6% in March before holding steady.

Another leading economist has also predicted one more rate rise this year, before the RBA sits on a cash rate of 3.6% to monitor the impact of rapid hikes on the economy.

HSBC chief economist Paul Bloxham delivered the forecast at a meeting of the Financial Services Institute of Australasia ahead of the first meeting of the RBA board of 2023.

“In my view, the RBA [will] lift a bit further and then they’re going to stop for a while, but I’m not completely convinced that the next move will then be down anytime soon,” Mr Bloxham said.

Meanwhile, Gareth Aird, head of economics at CBA, expects a further two rate raises from now of 25 basis points each.

“This would take the cash rate to 3.85%,” Mr Aird said, tipping hikes in March and April.

Mid-term fundamentals sound

Speaking at an event hosted by real estate prop-tech company AltX in early February, demographer Bernard Salt said homeowners and investors had reason to feel optimistic.

A significant resumption in migration, comprising both foreign students and skilled workers, will see a flood of new arrivals searching for properties, particularly in inner-city suburbs.

Analysis by PropTrack shows a jump in activity on from overseas-based house hunters.

Rent searches on from abroad in 2022 increased by 65% compared to 2021 and were 20% higher than pre-pandemic levels in 2019. Buy searches were up 10% compared to 2021 and 11% higher than 2019 levels.

As well as demand from foreigners, Mr Salt said longer-term demographic shifts will also underpin housing demand, particularly as mid-life Millennials start families and upsize.

“We’re about to see five-and-a-half million people pass from the single apartment stage into needing a lifestyle house,” Mr Salt said.

The home-building sector was hit by a perfect storm of factors in 2022, including surging materials costs, supply chain disruptions, and labour shortages.

As a result, the number of residential construction commencements fell off a cliff and approvals declined sharply.

While there are growing signs of a recovery on the horizon, it will take time for the industry to catch up, meaning the number of new homes being built will be soft.

Supply of new dwellings is already insufficient to keep up with demand.

Still plenty of buyers around

Across the capital cities, the number of highly engaged potential buyers browsing slipped by a fairly modest 4.6% in 2022.

“But that measure remains much higher than pre-pandemic levels,” Mr Kusher said.

Buyer activity is softer than it was in 2021, but that boom period saw an almost unprecedented level of frenzied activity across virtually all of Australia, he said.

The median length of time a home is listed on before selling has also lifted, from 32 days in December 2021 to 42 days in December 2022.

Again, markets at the end of 2021 were operating at historic speeds and at that time on site figure was a record low, so the decline is to be expected.

‘Scary’ figures put in context

The latest lending data from the Australian Bureau of Statistics points to caution among homebuyers, with a 4.3% decline in total loan commitments in December.

Although, as Real Estate Institute of Australia boss Hayden Groves pointed out, that’s a rather modest dip from the record-high peak seen in early 2022.

“The downward adjustment coincides with falls in retail spending as inflation and interest rates continue to rise,” Mr Groves said.

Both owner-occupier and investor loans have softened from last year’s highs as Australians adopt a “watch and wait” approach to property, he added.

“In December 2022, the value of total new loan commitments was 23% higher than the level seen in February 2020, prior to the Covid pandemic,” he said.

The ABS lending data also revealed the number of investors active in the property market has fallen over the past year.

Investment adviser Michael Pell, managing director of Propell, said new investment loan commitments dropped 28% year-on-year in December.

“The volume of new investors has fallen off a cliff because of the rising interest rate environment preventing many from accessing finance, at a time when our rental markets are critically undersupplied,” Mr Pell said.

The irony is that now is a perfect time for would-be investors to get into the market, he said.

“When you consider that rents have risen by double digits over the past year, as well as softer market conditions, it is actually ideal timing for would-be property investors to enter the market,” Mr Pell said.

“In fact, it is those prospective investors, who perhaps already own a home, who are the best placed to take advantage of the current market dynamics while also being unlikely to face the lending headwinds that existing investors may be experiencing at present.”


The surprising Sydney property buyers driving competition up

By Tawar Razaghi

First home buyers are driving up competition for entry-level Sydney homes thanks to stamp duty changes that have given them up to an extra $66,000 to spend at auction.

First time buyers have been out in force since the roll-out of the new property tax, which allows them to swap a lump sum stamp duty payment for a smaller annual tax for properties worth up to $1.5 million.

Those who opt for the tax, introduced on January 16, have ended up with tens of thousands of dollars extra to spend on their first home, agents report, leading to stronger-than-expected results for eligible properties.

A NSW Treasury spokesperson said the tax change was not expected to have any noticeable impact on dwelling prices in NSW.

First home buyers who chose to pay the property tax on a $1.5 million home would avoid paying an upfront lump sum of $66,000, according to the NSW government’s stamp duty calculator, which they could then redirect to their home deposit.

Those who purchased and settled between November 11 and January 16 are also eligible for the scheme, and can request a refund on any stamp duty already paid.

Selling agent Michael White of BresicWhitney has noticed a dramatic increase in demand for sub-$1.5 million properties since the changes came into effect, and more first home buyers are looking to entry-level houses over units.

“Late last year we had a couple of interested parties and this year that number has quadrupled,” White said.

“Most of them had to fork out $30,000 or $40,000 [in stamp duty]. Now they’re paying $1800 a year. So, it doesn’t take as long to save the deposit.”

More competition from first home buyers in an already tight market with fewer homes for sale has meant even stronger prices, he said.

In Forest Lodge, White recently sold a two-bedroom house at 39 Charles Street for $1,421,000 to first home buyers, who pushed the price well above the $1.2 million price guide.

“It had 11 registered bidders, half of those were first home buyers. Interestingly enough this house may not have achieved $1,421,000 last year [when the market was stronger] but certainly the first home buyers didn’t hesitate in spending the savings this year.”

It was a similar story in Bellevue Hill where a two-bedroom unit at 3/51 Bellevue Road recently sold for $1,355,000 to first home buyers.

Selling agent Doreen Wilson of PPD Real Estate, who guided the property at $1 million then increased the guide to $1.1 million, said the mix of buyers helped raise the stakes.

“I did have downsizers on it, they’re typically cashed up, but they drew a line in the sand for what they were prepared to pay,” Wilson said.

“Even the purchaser said to me, they had no intention of going to that figure. It was the emotion of the auction.”

While first home buyers were taking advantage of the reforms, their budgets were hampered by rate rises which were reducing their borrowing power, she said.

In St Peters, an entry-level house at 47 Lackey Street sold for more than expected thanks to fierce competition from first home buyers, even though investors walked away with the keys.

Selling agent Namir Mikha of Adrian William, who guided the property at $1.25 million, said it would not have achieved its $1.42 million sale price without the beefed-up budgets of first home buyers.

“If there wasn’t the strong bidding from the first home buyers it probably would not get to $1.42 million. The challenge wouldn’t be there. It went for a crazy price,” Mikha said.

“If you look at two-bedroom houses in St Peters, this house would have sold for $1.3 million. To go up more, to have two [first home buyer] bidders holding a position against an investor who owns a home on the north shore, that’s pretty awesome.”

While the new tax helps shave years off the time to save a deposit, it ultimately fuels more demand, and could worsen the outlook for first home buyers, said Grattan Institute economic policy program director Brendan Coates.

“It’s essentially a first home buyer grant by another name,” Coates said. “It is no surprise there is upward pressure on the sub-$1.5 million market. What the government is giving with one hand, the housing market is taking with the other.”

Coates supported a transition from stamp duty to a broad-based land tax. However limiting a property tax option to first home buyers, and allowing subsequent purchasers to continue to pay stamp duty, weakened the reform.

“It’s such a disappointing place we’ve landed because the government has not committed to stamp duty reform, but the opposition has promised not to introduce a land tax, effectively making stamp duty reform impossible in NSW. We’re in the worst place of both possible worlds.”


Is now a good time to buy your first home? The number of first-home buyers in the market has nearly halved

By Nina Hendy


Half as many first-home buyers are circling the market in search of a place to call their own right now, which means it could be a great time to pounce for those with a deposit.

The latest ABS Lending Indicators data reveals that the number of first-home buyers fell 3.2 per cent to 8576, a near halving of the peak level seen in 2021. All major states saw weaker buyer demand, with Victoria down the most at -4.1 per cent.

The drop in demand from first-timers in the property market means there’s less competition right now.

This coincides with falling property prices. The Domain End of Year Wrap 2022 shows house prices nationally have fallen 4.9 per cent from the March 2022 price peak, down about $53,000.

In some capital cities, prices have fallen even further; Sydney is down 8.3 per cent, Melbourne and Canberra down 6 per cent and Brisbane down 4.3 per cent.

The evolving real estate market comes amid a deterioration in rental affordability and a continual push into regional areas as buyers search out more affordable areas beyond metropolitan areas.

When interest rates stop rising, then the impulse to buy should become positive, BIS Oxford Economics senior economist Maree Kilroy says.

“The current fall in property prices reduces the deposit hurdle, but rising interest rates are making repayments more expensive,” Kilroy says.

Some first-home buyers are being pushed out of their buying goal amid consecutive rate rises, which have diminished their borrowing power, Domain Home Loan’s Natalie Abel says.

“Some buyers have lowered their price range and are scoping different areas to secure a home they can see themselves living in, which might be quite different to their carefully laid plans of 12 months ago,” Abel says.

Others, she explains, will be fearful of the rates continuing to rise, and their first home purchase will be unattainable for even longer. These buyers are scared of the market not correcting.

Meanwhile, higher-income earners willing to accept the risk are now watching house prices drop and rates go up and are holding back because they feel the market may correct and homes will be cheaper down the track. 

“These individuals have a healthy deposit saved and a good income but are holding out for now,” Abel says.

But there is a range of government initiatives intended to lower the entry hurdle to property ownership, Kilroy says.

“There are now 35,000 places available this financial year under the First Home Guarantee, which provides access to a minimum deposit of 5 per cent and avoids Lenders Mortgage Insurance.”

There are also a number of state-based initiatives in the market, so check your local state grants and concessions to see what you might be eligible for.

For example, in NSW, there’s the newly introduced First Home Buyer Choice initiative, which allows first-home buyers the choice of opting for an ongoing property tax instead of an upfront stamp duty charge from January 16, 2023. 

The scheme applies to properties valued up to $1.5 million. For the purchase of vacant land for the construction of a new home, the price cap on the scheme is $800,000.

The significant drop in competition among first-home buyers may not last into 2023, particularly once interest rates stop rising, according to Dr Nicola Powell, chief of research and economics at Domain.

She has tipped entry-priced houses and units to outperform their more expensive counterparts next year.

“Overall, entry-priced houses and units will hold firmer, particularly in our most expensive capital cities,” Powell says.

“This will be driven by the affordability barriers of purchasing, first-home buyer incentives and deteriorating borrowing capacity steering demand to more affordable options.”


‘The most important part of a home’: Why making the outdoors great matters

By. Sue williams


What on earth could be better than lounging around some gorgeous open-air pool or lingering over a dinner under the stars at a beautiful holiday resort? That’s easy: having those lovely outdoor spaces at home.

The pandemic crashing into our lives turned renovating homes to include seamless indoor-outdoor living as a top priority.

“People now spend more time at home and want to enjoy it as much as they can,” says valuer Belinda Botzolis, the founder of renovation advice company Add Valuer. “Outdoor entertaining areas have now become the second or third living areas of houses, and a true extension of the home.

“It used to be about having an old table and a few chairs in the backyard, but now it’s about how that space interacts with the indoors, and smart dining sets, loungers, coffee tables, built-in barbecues, pizza ovens, fire pits, pull-down electric blinds so you can enclose and warm the space for the winter.”

Award-winning architect Shaun Carter of Carter Williamson says just about every project he’s currently working on now involves great outdoor spaces. One home in Newport he’s named LA Cool has a cabana, an infinity pool looking out to the ocean, and generous decking for both lounge and dining settings.

One other recent smaller project in Lilyfield also involved a pool and deck. “It’s always another room for the house, effectively,” he says. “An easy transition from indoors to the outdoor space is very important.

“We try to make those spaces double height if possible and, in many cases, it’s the cheapest new room to create as you don’t have to make it waterproof.”

There are also always homes on the market already with great outdoor entertaining areas. In Kenthurst, in Sydney’s north-west, for instance, there’s a five-bedroom house for sale with bifold stackers leading out to the al fresco area, a pool, a spacious sheltered verandah and a fire pit amid the landscaped gardens.

“The beautiful thing is its multiple outdoor spaces so you can have a lot of people enjoying the outside at the same time,” said agent Joel McSeveny of Wiseberry Dural. “We’re seeing these resort-style facilities becoming more and more popular.”

In the east, there’s a two-storey, three-bedroom townhouse in Bronte up for auction with a shady al fresco dining area and a large outdoor lounge in a private tropical garden flanked by a lush green wall.

“That’s such a great feature,” says PPD Real Estate agent David Tyrrell. “The owners have just done a renovation and it has an electric awning now, too. This kind of set-up with a townhouse is quite rare.”

Down south, a new four-bedroom house on offer in Caringbah South has a covered outdoor area with a built-in barbecue kitchen, fridge and pool.

“All the best-selling properties now have great outdoor entertaining spaces, especially with in-built kitchens, dining and lounging areas,” says John Schwarzer of Highland Sutherland Shire and St George.

“It’s probably now the most important part of a home. It creates so much ease of living without too much maintenance.”

Added extras can also make a huge difference to the feel of that outdoor space, believes property strategist Werine Erasmus, of The Happy Renovator. Downlights that can be dimmed can help create atmosphere, while a ceiling fan for the hotter days can make it even more useable.

“At the moment, we’re seeing wider blackbutt quality timber being used for decking rather than the old favourite pine,” she says. “It makes it look more sophisticated. People should also consider putting in an outdoor kitchenette and plumbing as well as a gas point for a barbecue.

“It’s important, too, to have an insulated roof so, in winter, you’re not dripped on by condensation.”

Outdoor spaces leapt in value through COVID, where those who had them revelled in the sense of freedom they imparted. But even today, when we’re much more able to enjoy the great outdoors, many people still like to cocoon themselves – more than they used to – at home.   

“We’re even now seeing teenagers spending more time at home and inviting their friends over instead of going out,” says Botzolis. “Then those outdoor spaces can be wonderful as they can hang out without disturbing everyone else.”


Sydney house prices have plunged, but property is no more affordable

By Tawar Razaghi and Meslissa Heagney-Bayliss
28. Jan. 2023


Gurpreet Singh Virk could borrow about $1 million to buy a house last year, but after eight back-to-back interest rate rises, he can borrow only $750,000.

Despite Sydney house prices posting the steepest annual decline on record last year, buying a home has not become any more affordable for many.

Instead, rising mortgage costs mean housing has become more expensive for buyers like Virk and his partner, who are locked out of the detached housing market even after price falls.

“I have only two options left: either move to a different state or buy an apartment. I missed the boat for a house in Sydney. I won’t even be able to find a house in Campbelltown,” the 31-year-old accountant said.

“If I wanted to buy a house, last year I was able to. Now I can only afford an apartment.”

Virk is not alone as the average buyer, whether on a single or dual income, has lost hundreds of thousands of dollars in borrowing capacity. A couple earning two average incomes totalling a combined $184,000 has lost $306,000 in borrowing capacity since April, Canstar analysis shows.

That couple, who could once buy a property for up to $1,636,250 assuming they had a 20 per cent deposit, now can buy a property up to $1,253,750. The figures assume the buyers slash their living expenses and borrow the maximum a bank will lend.

Their budget would still be about $160,000 short of Sydney’s median house price despite last year’s downturn, when house prices fell 10.9 per cent.

Jasjeet Makkar, Virk’s mortgage broker and managing director at Icon Mortgages, said most of his clients had their budgets reduced much more than property prices fell.

“Everyone has had their borrowing capacity heavily impacted. A lot of the drop in prices has been offset by the reduced borrowing capacity,” Makkar said. “Effectively, it’s a lot more expensive to become an owner than what it was last year.”

Domain’s chief of research and economics Dr Nicola Powell said while Sydney had recorded the steepest annual decline in house prices, it was unlikely to fall enough to help offset a sharp rise in mortgage repayments.

“We would need to see significant a pullback in price that exceeds what we’re seeing to equal the mortgage affordability of rock bottom rates,” Powell said.


That was unlikely to happen, she said, as no downturn has erased the gains in the boom that preceded it, historic data shows.

“We’ve never seen an upswing erased by a downturn for Sydney house prices over the last 30 years, that’s never happened, it’s unlikely to erase the growth,” she said.

ANZ senior economist Felicity Emmett said this week the bank’s analysis suggested a 30 per cent drop in prices would be needed to make housing more affordable in the higher interest rate environment, but she does not expect prices to fall that far.

Westpac senior economist Matthew Hassan said while price falls meant a smaller deposit was needed, and therefore a shorter amount of time needed to save, those benefits were being negated by rising rates and the extra money needed each month to pay down the loan.


“If you have a 10 per cent cheaper house, and a 10 per cent cheaper deposit, you still have to take into account the ongoing mortgage,” Hassan said. “So the falls aren’t enough to restore affordability in terms of higher mortgage repayment requirements.”

Agents say housing in Sydney is more expensive across the board, despite record price declines, thanks to faster rising mortgage rates.

“Housing is still really expensive and off the back of rising interest rates people do really struggle to borrow enough money to buy property in Sydney,” Leanne Pilkington, chief executive of Laing+Simmons said.

“Everybody is saying the same thing, that ‘I can’t borrow as much money, and so I can’t afford the house that I could have afforded, now.’”


BresicWhitney chief executive Thomas McGlynn said while buyers would be able to find properties at a discounted price, any benefit has been cancelled out by increasing mortgage rates.

“Any discount would be swallowed up by extra repayments. In actual fact, repayments have probably made it more unaffordable to buy a home in Sydney,” McGlynn said.

“If you’re buying purely cash in the bank, you would be better off today in terms of buying a property … But the majority of people buying are buying with a mortgage.”

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