“The Bottom of the Market!”

Over the last few months, I’ve read a plethora of articles discussing the reasoning for declining property values and just how long it will last.

• “Sign that Australian house prices will drop even further in 2023”
• “Will house prices rise or fall in 2023 across Australia?”
• “Australian property values notch deepest falls on record”

It’s straightforward right? Rising interest rates are to blame, correct? Well, maybe yes, maybe no.  The second largest downturn in the property market on record in Australia (2017 to 2019) was not due to increases in cash rates, it was a function of employment and income factors.

Well, it must be government regulation via the Australian Prudential Regulation Authority (APRA), right? It could be for a portion of the market. APRA did introduce several temporary restrictions to mortgage lending, however this was in response to an unusually high level of home lending for investment purposes not owner occupation.

Interest Rates

The Reserve Bank of Australia (RBA) is indicating to the market that further interest rate increases are coming in 2023.  That is driving sentiment, right? Well, based on the RBAs previous advice “In late 2020 and for much of 2021, the board indicated that the first interest rate increase was not expected for at least three years, and then not until ’2024 or later”. Oh no, I am not sure I would be betting the house on the RBAs signals (yes, pun intended)!

Property is illiquid.  Housing values are tied heavily to the fundamentals of employment and income.

We note:

• Wage growth has increased by 3.4% (Annually to September 2022).
• The outlook for economic growth and employment is moderate

Add to the mix:

• Property pricing has adjusted
• Vendor expectation has altered
• Purchasers have adjusted their habits, maximising their chances of obtaining finance
• Housing values fell at a slower pace across the final quarter of the year

In contrast to barrage of media the query in my mind is “Are we at bottom of the market?” We very well could be. Economists certainly don’t have a great track record in their predictions “Most economists were wrong on house prices in 2022”

If you are selling it is critical you appoint an agency that knows how to maximise pricing in uncertain times.

Need to sell call John Wills on 0467 44 38 38.