After a rocky 2022, many "experts" anticipated home prices to drop further this year, but in early 2023 the market reset and prices have gone up every month since.
With the spring selling season upon us, conditions are even better than earlier this year and it's going to be a busy spring selling season according to Cameron Kusher, PropTrack's Director for Economic Research who listed 5 trends that will shape the property market this season:
1. More properties for sale
Kusher explained that we usually see more new listings in the spring, but last year spring didn't bring the usual increase in listings.
But PropTrack's data this year show that new listings in Sydney and Melbourne started to lift well before spring, after being persistently low for around a year.
"We expect momentum in market activity to continue in Sydney and Melbourne, at least initially.
It will be important to monitor whether the lift in new listings in Sydney and Melbourne carries through the entirety of spring or if new listing activity slows before the end of the selling season, given it kicked-off earlier."
2. Interest rates at, or near, peak
Borrowers have been dealing with rising interest rates since May last year, even though official interest rates have stayed the same for the past three months.
Kusher further commented:
"It's likely rates are at or near their peak, though they may still rise again in the future.
For people buying or selling real estate, the pause in interest rates affords more certainty.
Even though borrowing costs have significantly increased, certainty around mortgage costs is likely to increase the willingness of buyers and sellers in this market, boosting activity."
3. More favourable conditions for buyers
Many predictions thought property prices would drop this year because borrowing power decreased by about 30% due to higher interest rates.
However, that hasn't happened.
Instead, we've seen fewer homes available for sale, a big increase in sales, and more people wanting to buy.
Kusher noted that:
"If supply increases, this could result in slower price growth or even some price falls.
More stock for sale means more choice for buyers and potentially less urgency to purchase, especially if buyers are expecting more options will come to market over the coming months."
4. Housing affordability to worsen
PropTrack's data show that national housing affordability is at its lowest level since 1995, and with many homeowners still rolling off fixed-rate mortgages at around 2% and resetting to mortgage rates closer to 6%, they will have to dedicate a lot more of their income to servicing their mortgage.
"For some borrowers this significant increase in mortgage repayments may result in them having to sell their properties.
Home prices are broadly expected to continue climbing this year, diminishing the supply of cheaper housing and further deteriorating affordability."
Will rents continue to climb?
While rents in many major cities have gone up a lot in the past year, the pace of rental price increases has been slowing down in recent months.
Kusher noted that it’s unclear if rental affordability has stretched too far to rise further or if this slowing is temporary.
He further explained:
"During the pandemic, average household sizes shrunk and people flocked to houses over units.
Fast forward to today and the gap between the cost of renting a unit and a house remains wider than it was pre-pandemic.
Given this, renters are likely to look for cheaper alternatives which initially may be a unit but may end up being a share house.
Rents will likely continue to climb across the major capital cities but not to the magnitude that they have been rising over the past year.
Furthermore, we may continue to see rental growth for houses lag that of units."