After a few years of booming sales and record prices, there’s no doubt rising interest rates and inflation significantly dampened the property market in 2022. While the cost of having a mortgage rose sharply, affecting buyers’ purchasing power, investors and first home buyers took a quick step back with the aim of seeing how far the market declines before making any big decisions. But what factors are likely to shape the property market in 2023, and can we expect to see a shift from the stagnant conditions that besieged 2022?
Slowing rate rises to boost buyer confidence
Some experts have suggested there could be a slowdown in interest rate rises in 2023, which is likely to see confidence steadily trickle back into the market. With interest rate rises reaching a plateau, or even declining, there could be an uptick in buyer activity which, in turn, is likely to stabilise property values and mark the end of the ‘property price correction’.
Investors and first home buyers make a comeback
When it becomes widely recognised that property values are unlikely to continue declining, property investors and first home buyers typically return to the market to snap up the best deal. While the stars might align for investors in 2023 as more favourable buying conditions coincide with high rent, homes could be more affordable for new buyers, driven by lower prices and stable or declining rates.
Population changes to drive local markets
COVID-19 border closures halted immigration and domestic movement, and despite the lifting of restrictions, 2022 saw a sluggish recovery compared to pre-pandemic conditions. In 2023, property markets could be impacted by population changes that haven’t been felt in a few years. Specifically, sudden increases in demand for housing could drive up property prices, especially in sought-after localised markets.
Hopeful property owners wait for ‘the right time’ to sell
Any stabilising of property prices in 2023, whether they’re actual or expected, could see existing homeowners become reluctant to sell as they watch and wait to see how much their home’s value might increase. The ‘watch and wait’ trend could impact the availability of stock in a market where demand is rising, contributing to the prospect of increasing prices.
New and renovated homes the preferred choice
One of the side-effects of high inflation, which is expected to peak in 2023, is that the costs of renovating a home have skyrocketed at a time when home values are suppressed. Consequently, as the costs of renovating a home hit their peak while property prices are at their lowest, already renovated and new homes are likely to be the preferable choice for buyers in the market.