Do you have to wait until 2023 to buy a property?
Real estate prices are expected to drop in 2023, do you have to wait to buy? Four experts share their views.
House price forecasts are constantly in the headlines, and the recent Commonwealth Bank forecast was no different. The CBA has said it expects prices to rise another 7% throughout 2022, before falling 10% in 2023. CBA Australian Economic Director Gareth Aird said describes the Australian housing market as being “at the twilight of an incredible boom that has fueled record mortgage rates“.
So what does this mean for anyone planning to buy a property in the next year? Should they wait until 2023? This is the question we asked four real estate experts. Here is what they had to say.
Lender forecasts have turned out to be a dangerous thing lately. Take 2020, for example, when our major lenders predicted losses that did not happen.
At the start of the pandemic, our real estate headlines were overall pessimistic. Buyers were rightly fearful, job insecurity was palpable, and decisions about real estate transactions were being suspended by both sellers and buyers. It was a difficult time because we had only bounced back 10 months before.
However, it is important for us to remember the factors that fueled our market recovery after May 18, 2019. Two very powerful changes marked a dramatic about-face for our real estate markets at the time. The removal of the threat of tax reform (especially changes in negative debt and capital gains tax) and the loosening of credit, the Royal Banking Commission having become a distant memory, worked in perfect synchronization with record interest rates.
Those who were in the market at the time will remember only too well how quickly our market accelerated from June 2019 until the start of the pandemic. The market really felt like they were on steroids.
Fast forward so far, the same favorable conditions remain. Credit is not squeezed. Loan service rates have tightened slightly from pre-2019 highs. Lenders are eager to lend, liquidity rates remain low, our international borders will reopen, and employment is in a healthy range.
Buyers who plan to program the market to capitalize on future price drops should ask themselves what it might mean to them if the ABC’s predictions are wrong. The past two years have taught many buyers a hard lesson in predicting to follow. So many buyers are now excluded from markets that they could have afforded had they not waited for an expected slowdown.
Cate bakos is the founder of Cate Bakos Property, an independent boutique and buying agency agency in Melbourne. She is co-host of the The Property Planner, Buyer and Professor podcast series and also runs an in-house podcast called The Property Diaries.
Most people wish they had bought more property when they look back, but back then they were sitting on the fence and had plenty of excuses not to make a decision. It is always easier to do nothing than to take positive action.
Banks and economists don’t have much experience predicting the future and I take them all with a pinch of salt. They believed there would be a massive crash with COVID-19 in 2020 and they believed there would be only modest increases in 2021 – none of which have occurred.
I have invested in real estate for almost 30 years, personally own over $ 20 million in real estate, and have bought during times of boom, recession and stagnation. I’m not smarter than anyone else, I just took more action than most other people, because I was unmoved and looked for the long haul.
My rule of thumb is to buy when:
- The bank will grant you a mortgage
- You can buy at a conservative appraisal price and
- You have enough cash to get through the next few years
These are the excuses of the last few years:
2017 – the market peaks and is about to collapse
2018 – why buy now when the market is going down and I want to pick the bottom
2019 – I can’t get a mortgage due to the credit crisis Royal Banking Commission
2020 – COVID-19 will explode the market
2021 – I missed the boat because the market has already risen too quickly
2022 – the market will collapse / interest rates will rise
And so the cycle of apologies continues. Read a newspaper from the 1960s or 1970s and you will probably read the exact same comment.
No one knows what the future holds, but the residential real estate markets, particularly around the median price around our major capitals, have increased in value decade after decade.
Please don’t look back 10 years and say I wish I had bought more
Chris Gray is the CEO of Your Empire, a home buyers agency that builds real estate portfolios for people on a tight schedule. Chris is a qualified accountant, buyers agent and mortgage broker.
My first response to these titles is always: what exactly do they refer to? Does that mean every property is going to lose 10% or just houses? Or are they just townhouses and not single-family homes? Or a combination? Or were they just talking about Sydney and not Adelaide or maybe just Melbourne or Perth? Or maybe they were talking about a single suburb in one of these cities?
While these titles always receive a lot of media attention – especially when Australia’s largest bank is mentioned – they rarely paint a picture that is useful to us as we initially conclude that this must mean that every property will be affected and by therefore, we should start to panic. However, the Australian real estate market is not that simple as it is made up of hundreds and hundreds of submarkets and they rarely move in the same direction at the same time.
So the reality is, generalized commentary doesn’t help anyone and this title is no different.
However, this serves as a reminder that ownership does not always increase. We’ve had a remarkable run in most major markets since recovering from the initial pandemic shock and history is littered with price corrections after the bull runs, so whether you need to pay attention to the stock depends on the response to. this question: are you buying short term or long term?
As a short-term speculator, maybe now is not the right time? I think some of the post-pandemic gains will be returned and if your outlook is less than 10 years, I would take the title seriously. If timing is your game, then it can be useful for you to wait.
But if you are an owner-occupier and have been in it for 10 years or more, you are probably motivated by practical and emotional factors related to the timing of the market cycle, as we rarely make this important decision beyond asking ourselves “Then I allow myself to buy the house I want in the suburb that I want now – yes or no?
As an investor, the formula is very simple in any market: buy the right asset, finance it properly, enter when your cash flow permits, and hold for the long term.
So I understand that no one wants to believe in sentiment downside, but my advice here is to let time – not the headlines – do the heavy lifting for you when you assess whether you should enter the market now.
Bryce holdaway is co-host of The Property Couch podcast, co-author of The Armchair Guide to Property Investing and Partner of Empower Wealth.
When we talk about falling house prices, it is essential to understand what this means. Essentially, such a forecast evaluates either an entire city or an entire country and applies a general figure to the cumulative real estate market.
In practice, real estate markets are often not subject to the same economic influences, all at the same time. Even in these recent times, when it seems that the value of property in each market has skyrocketed, there has been a significant difference between the degree of growth from one market to another and from one type of property. to the other. Indeed, some apartment markets have fallen in recent months, but an assessment of the city in which these apartments exist would indicate that all properties have increased in value.
It is not uncommon for a 10% drop to be represented by a 10% drop in the top third of the real estate market, a 5% drop in the mid-range market, and 10% growth in the markets. affordable from a city. The net result is a general decline of 10%, yet some properties in this market may have increased during the measurement period.
And so, in answer to the question “do I have to wait until 2023 to buy a property”, the answer is that it depends on where you want to buy. I expect the very scenario I mentioned to unfold – with high-end and mid-range properties most certainly bearing the burden of declining value, while affordable markets in the suburbs of cities and towns and cities. some of our larger regions will hold up, and probably even grow in value until 2023.
The trick is to understand the fundamentals enough to be able to select the markets with the growth drivers to perform. And it’s easy when you understand that infrastructure, family demographics, job growth, and industry diversification go a long way in creating a demand for properties in affordable areas with growing populations.
Cover image source: SewCream / Shutterstock.com
Thank you for visiting Canstar, Australia’s largest financial comparison site *