The Australian property market is entering a new phase. It is moving from a once-in-a-generation property boom to a multi-speed adjustment period, where house prices are expected to fall by 7-10 per cent in 2023. Price falls of this scale could make a significant dent in affordability, but a substantial reversal would be required to see housing become affordable again. The CBA, AMP, ANZ and Knight Frank have all said that average home prices would have to fall between 25% and 45% in order to make Australian housing affordable again. While house price declines will vary among states and territories, they are also likely to be dragged by a tightening of credit availability as the Reserve Bank of Australia continues to tighten its monetary policy. This tightening cycle will likely drag on borrowing capacity and, in turn, stifle buyers' ability to bid up property prices. In terms of where prices will decline, PropTrack's property market outlook predicts that the biggest drops will occur in Sydney and Brisbane, which are expected to lose between 8 and 10 per cent of their value by 2023. Canberra, Melbourne and Hobart are predicted to also see declines of between 7 and 10 per cent. Despite the current market decline, there is a clear opportunity for investors to take advantage of rising rents and rental yields with Hunter Galloway. Specifically, regions that have experienced rapid growth over the past couple of years and are now in an expansionary mode will be attractive to potential buyers. These locations will also have high walk scores, which means they offer a wide range of amenities within a short walking distance or drive. This is especially true of lifestyle suburbs, which offer a premium as a result of their accessibility. As work-from-home preferences continue to emerge and employment prospects improve, suburbs such as Geelong, Bendigo and Ballarat will experience population growth on par with capital cities. These areas will be more appealing to young professionals, and the demand for these types of homes is expected to continue growing as the economic recovery gains momentum. While a rise in demand may slow down the housing price declines, it's important to remember that house prices are still very much above pre-pandemic levels. In fact, a peak-to-trough decline of 15-20% is still possible, according to ANZ senior economist Adelaide Timbrell. What's more, a slowdown in housing market activity would be a good opportunity for sellers to list their properties at a lower price, providing they are confident about the future of their property. This is because a slowdown in the economy and tightening of interest rates could encourage buyers to bide their time and wait out the housing market. For more details, see page. In addition to the ongoing rate hikes, another factor that is causing a slowdown in the housing market is a lack of supply. With the number of houses on the market currently 31.5 per cent below its five-year average, and 2.9 per cent lower than in January 2020, it's clear that sellers are reluctant to put their homes on the market at this stage of the cycle. For more information, check out this related post: https://en.wikipedia.org/wiki/Real_estate_trends.
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