In this blog post, we’ll examine some of the key factors that are likely to shape the housing market in 2023, and what they could mean for ADF members and their families.

Let’s kick off by remembering that the Australian property market had been on a healthy upward trend for the past few years with an unprecedented surge in some areas. That was driven by low interest rates, strong population growth, government stimulus and housing demand. However, the pandemic, global economic downturn, higher inflation, and reduced migration are just a few of the factors that have caused a recent slump in house prices.

We’ll take a closer look at some of these factors to answer the question that everyone’s asking – will Australian house prices drop this year?

Capital Property investment specialists have lived experience navigating volatile markets and interest rate fluctuations. We can steer you in the right direction to take advantage of opportunities in today’s market.  Book a discovery call with Capital Properties today.

Capital Property investment specialists have lived experience navigating volatile markets and interest rate fluctuations. We can steer you in the right direction to take advantage of opportunities in today’s market.  Book a discovery call with Capital Properties today.

On the go? Here’s 30 seconds of take outs:

  • After some record highs in property markets in recent years, last year’s dip was expected.
  • The RBA rate hikes meant reduced borrowing capacities & higher mortgage costs, pricing some investors out of the market.
  • With the last hike expected this quarter, investors are ready to take advantage of lower entry price points & great rental yield in high growth areas.
  • Increased migration means higher demand for housing & a strong rental market.
  • Buyers will pay more for their ideal home & in-demand locations.
  • The Capital Properties team can help you navigate changing Australian house prices.

Keep reading >>

How have Australian house prices changed in recent months?

Earlier this month, CoreLogic (Australia’s leading property data & analytics provider) reported a massive drop of Australian home values by an estimated average of $64,820 since May 2022.  This is mostly due to the Royal Bank of Australia’s relentless rate rises in the past 9 months.

These rate hikes have meant that many people have been left with a reduced borrowing capacity. At the current cash rate at 3.10%, some people’s borrowing capacities have dropped by almost 30%. And the higher interest costs have made some buyers wary of purchasing property at all.

With more hikes expected at some point this year, those asking “will Australian house prices drop this year?” might be expecting a grim outlook. But it’s not all bad news. And as Albert Einstein said, “in the midst of every crisis, lies great opportunity.”

Where have Australian house prices dropped the most?

Australian house prices have dropped by an average of 8.4% between May 2022 and January 2023.

The highest fall in property values were seen in Australia’s three largest cities, with Sydney falling -13%, Melbourne dropping by -8.6% and Brisbane coming down by -10%.  Perth remained more stable, with values falling by approximately 4-6%. While suburban house prices in Adelaide stayed constant.

The top 10 areas that fared the worst were in Sydney suburbs with Narrabeen topping the list of reduced house values – down by -15-20%. However, it’s worth noting that a correction was almost inevitable after an increase of 40% in house costs in that area during in the boom.

What caused Australian house prices to drop?

As we mentioned earlier, there are multiple factors that caused Australian house prices to drop in the past year. Some of these are obvious. The pandemic meant that migration and population growth was dramatically reduced, so there was less demand for houses, particularly rental properties.

And the post-pandemic recovery effort to reduce inflation, meant that concern about declining property values and rising mortgage rates was at an all-time high.

Many potential buyers were excluded from taking out home loans with lenders cautiously loaning only to those who could handle the higher interest rates. And some had their borrowing power reduced so much that they were priced out of their ideal market.

The rising inflation costs and corresponding increased cost of living also means increased overall personal debt, making it harder to save for the deposit.

When house prices drop, opportunities await

Most experienced investors understand that real estate is a long-term game and will have had contingency plans in place to deal with the increased temporary costs. However, the past year has seen some investors proceed with caution. Nobody wants to purchase an asset that could end up being worth less that you paid for, no matter how good the rental yields are during the time. Therefore, many investors have watched and waited and are now poised to buy as soon as the downturn has stabilised.

With the last predicted rate hike expected in this first quarter of this year, it’s likely that demand will increase as investors take advantage of the lower Australian house price entry points and high rental income. Not to mention the opportunities for capital gains when purchasing in high growth areas.

What factors boost Australian house prices?

Again, there are multiple factors that will influence the increase of Australian house prices, but one of the biggest must be the imminent population growth.

A recent commitment from the Australian Prime Minister, Anthony Albanese, to tackle the gap in skilled workers, is allowing for a significant increase to the quota for the Permanent Migration Program. That means Australia is about to witness a huge surge in immigration – potentially the biggest we’ve ever seen.

The trend of inter-state travel also seems set to continue as people adapt to their new post-pandemic, work-from-anywhere freedoms!

And of course, we are finally ready to welcome overseas students back to our shores. As Australia has the significantly highest ratio of international students per capita in the world, it’s expected that we’ll be able to facilitate up to 870,000 students this year.

Each of these will create strong demand for rental properties across the nation, driving up rent and competition.

Will Australian house prices drop this year? – Not if you choose the right house

Now that many people are continuing to work from home and are no longer tied down to a specific area, they’re actively searching out lifestyle-enriching properties. They want to live in homes that allow them to work, live and entertain in comfort.

Buyers look for easy access to amenities such as community facilities, good schools, retail, entertaining and sporting resources. And recent Australian house sales data shows that buyers are happy to pay a price premium for their ideal home, in their preferred location.

The Capital Properties team can help you navigate Australian house prices with a strategic approach to identifying which area and property has sound property investment fundamentals.

Navigating changing Australian house prices

At Capital Properties, our vision is to see today’s generation of Defence personnel become switched-on property investors and achieve future financial security. We can help you navigate changing Australian house prices.

As ex-Defence Force members ourselves, we recommend investment property advice and strategies that we know are affordable and within reach even early in your Defence career.

Our team of experienced property investment mentors will help you get on top of your financial literacy with streamlined property investment education and a strategic property plan, << link to Strategy Sessions>> empowering you every step of the way.

And our buyer’s agent service can help you source all types of property options, including residential and industrial. We research the current market and recommend investment properties with higher yield potential, as well as high growth opportunities.

The Capital Properties team are property investment experts who are passionate about helping you develop a wealth building strategy. We’ll help you manoeuvre through the challenges of property investment so that you’ll always feel empowered to make the right decisions for your financial future.

Book a free Discovery Session today and let’s get started.