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Investing homeowners will benefit next year as house prices start to rise again, says a data analyst.
SQM Research predicts double-digit house price gains in 2023, and managing director Louis Christopher forecasts an end to Reserve Bank of Australia rate hikes by mid-year and a return to rate cuts.
“House prices in the Australian capital will begin a recovery in 2023 as a result of a pause in interest rate increases,” it said.
House prices in Sydney were expected to rise between 8 and 12 percent next year if Reserve Bank interest rates did not rise above 4 percent, a monetary policy forecast in line with big banks.
Investing homeowners will be in a good position next year as house prices start to rise again, says a data analyst (pictured, a row outside a Bondi studio in Sydney)
Australia’s largest city was expected to be the biggest beneficiary of a tight rental market, with immigrants and international students returning again.
The NSW government now also offers buyers the option of paying an annual property tax instead of an upfront stamp duty bill in the tens of thousands.
This recovery in Sydney will be driven by increased underlying demand for residential property as a result of increased overseas arrivals, return to office, existing rental housing shortage, new stamp duty/ property tax and the expected continued strength of the Sydney economy,’ said Mr Christopher.
Melbourne prices were inclined to grow by a more moderate 2 to 6 percent while Brisbane prices rose 3 to 7 percent.
Perth was forecast to see a much more generous increase from 9 to 13 per cent.
The RBA cash rate is now at a nine-year high of 2.85 percent, after seven consecutive rate hikes since May.
This has sent Sydney’s median home and unit price tumbling 10.9% since peaking in April, back to $1,025,684, making it by far the market in Australia’s hardest-hit capital, CoreLogic data for November showed.
SQM Research predicts double-digit increases in house prices next year, with managing director Louis Christopher predicting an end to Reserve Bank of Australia rate hikes by mid-2023 (a line shown in the photo in Clovelly in eastern Sydney where a unit is offered for rent)
ANZ and Westpac expect the RBA cash rate to hit an 11-year high of 3.85 percent by May 2023.
But the futures market is less concerned, predicting a 3.6 percent cash rate for July after inflation in the year to October grew 6.9 percent, below the highest in 32 years of 7.3 percent in September.
Christopher said a cash rate spike below 4 percent meant there would be no forced sales by those who can’t pay their mortgage.
His optimistic forecasts are also based on the Reserve Bank cutting interest rates in the second half of 2023.
SQM Research’s forecasts are based on peak inflation of 8 percent, a level that is still more than double the RBA’s 2 to 3 percent target.
“It will certainly be a very challenging year for the RBA to walk the tightrope and achieve a soft landing for the Australian economy,” Christopher said.
“However, contrary to current popular opinion, I believe they will manage to do just that.”
Rental vacancies are still in short supply with just 1 per cent of homes available in Australia’s capital markets, data from SQM Research showed.
Christopher expects rents to continue to increase until the end of 2023, by which time more new homes will have been completed, boosting supply.
Expensive rents would also encourage more renters to buy their first home, despite a series of interest rate hikes.
Sydney has a slightly above median rental vacancy rate of 1.3 percent, but for the year to November, median weekly rentals rose 28.4 percent to $695.81, and this figure covers both homes like apartments.
Sydney has a slightly above median vacancy rental rate of 1.3%, but for the year to November, median weekly rentals increased 28.4% to $695.81, and this figure includes both houses and apartments (in the photo).
Melbourne, with a rental vacancy rate of 1.5 per cent, saw its rents rise by 22.8 per cent to $512.89.
Brisbane, where the rental vacancy rate is 0.8 per cent, has seen a 24.5 per cent increase in rents to $572.40.
Perth, with an even tighter rental vacancy rate of 0.4 per cent, has seen its rents soar 18.3 per cent to $553.49.
Adelaide also has a rental vacancy rate of 0.4 per cent and has seen its rents rise 20.6 per cent to $494.46.
A Finder survey of 40 economists showed that 88 percent of them expect the RBA to raise interest rates on Tuesday next week by 0.25 percentage point, taking the cash rate to a 10-year high of 3 ,1 percent.
The Big Four banks also forecast a 25 basis point rate increase for December, which would be the eighth consecutive monthly increase.