What is going to happen to the Australian property market during the rest of 2022 and 2023?

PHOTO: The Australian property market. FILE

The housing market appears to be more balanced between buyers and sellers
It is likely we are near the terminal cash rate target for this cycle, says Pete Wargent of BuyersBuyers
Immigration to fuel demand next year

As we enter the last quarter of the 2022 calendar year, the co-founder of the first national property buyer’s agency network in Australia, Pete Wargent of BuyersBuyers, has argued that the Australian housing market is now more balanced between buyers and sellers.

Mr Wargent said that there is no question that the interest rate hikes knocked the housing market earlier in the year.

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“That, combined with improved auction clearance rates, indicate that the market is more balanced, especially when it comes to high-quality properties in popular areas,” he said.

“There hasn’t been a tightening cycle of this pace and magnitude since 1994 – when the cash rate target went from 4.75 per cent to 7.50 per cent between July and December – so most young borrowers have never seen anything like this before, and it had a very significant impact on consumer confidence.”

Pete Wargent, BuyersBuyers

pete wargent — **Pete Wargent, BuyersBuyers. Image – LinkedIn.**

“However, the Reserve Bank only hiking 25 basis points this month has had something of a soothing impact on buyer confidence – although there will likely be further hikes to come, it does add to a general feeling that we are getting closer to the terminal cash rate target for this cycle”.

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Mr Wargent added that after months of gloomy headlines, consumers are tired of hearing the same old messages and with the absence of a major property price correction, a lot of buyers are simply moving on and purchasing property.

“At some point you just have to choose to get into the market” he said.

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So, what is going to happen to the property market this year and next?

BuyersBuyers CEO Doron Peleg said that capital city prices are now around six percent below their peak, according to CoreLogic’s home value index, and with some further declines expected to occur.

There has been a steady improvement in the auction clearance rate, indicating a more balanced market.

“With Australia experiencing full employment, many prospective vendors can wait out the downturn, given most owners have built up significant equity, have substantial cash buffers, and given that rents are rising by up to 20 per cent per annum,” said Mr Peleg.

“Property market indices tend to lag, because there’s always going to be a delay between offers being made and property sales being settled, recorded, and reported. So price indices will likely show further declines for some time to come yet”

5-Capital City Aggregate

Mr Peleg has said the price declines are likely to become less steep, before being confirmed as bottoming out in the new year.

“CoreLogic reported the highest preliminary auction clearance rate since May this weekend, driven by improving buyer sentiment in Melbourne and Adelaide, as well as less stock flowing on the market.”

Fortnightly % Change in Home Values

“Brisbane’s house prices are seeing some of the speculative excesses wiped away this year, but we’ve also seen unit and townhouse prices rising in many cases.”

“There are still some areas of weakness in Sydney, but stamp duty being scrapped for first homebuyers up to the $1.5 million price point in the new year will likely see a recovery driven from the bottom of the market up,” Mr Peleg said.