Investing landlords will benefit next year when house prices start to rise again, says a data analyst.
SQM Research forecasts some double-digit house price increases in 2023, with managing director Louis Christopher predicting an end to the Reserve Bank of Australia’s rate hikes – and a return to rate cuts – by mid-year.
“House prices in the Australian capital will start to recover in 2023 due to a pause in interest rate hikes,” he said.
House prices in Sydney were expected to rise 8 to 12 per cent next year if Reserve Bank interest rates did not rise beyond 4 per cent – a monetary policy forecast in line with the big banks.
Investor landlords will be in a good position next year when house prices start to rise again, says a data analyst (pictured shows a queue outside a Bondi studio apartment in Sydney)
Australia’s largest city was expected to be the biggest beneficiary of a tight rental market, with returning migrants and international students returning.
The NSW government is also now giving buyers the option of paying an annual land tax instead of paying tens of thousands of stamp duties up front.
This recovery in Sydney will be driven by the increase in underlying demand for housing due to the increase in arrivals from abroad, the return to office, the existing shortage of rental housing, the new stamp duty/land tax changes and the expected continued strength of Sydney’s economy,” said Mr Christopher.
Prices in Melbourne are expected to rise by a more moderate 2 to 6 percent, while prices in Brisbane rose 3 to 7 percent.
Perth was tipped to see a much more generous 9 to 13 percent increase.
The RBA cash rate is now at a nine-year high of 2.85 percent, following seven consecutive rate hikes since May.
As a result, Sydney’s median home and unit price has fallen 10.9 percent since peaking in April, back to $1,025,684, making it by far Australia’s hardest-hit capital city, CoreLogic data for November showed.
SQM Research forecasts some double-digit house price increases next year, with managing director Louis Christopher predicting the Reserve Bank of Australia’s rate hikes coming to an end by mid-2023 (pictured is a line at Clovelly in Sydney’s east, where a unit is being put up for rent offered )
Property price rises when interest rates rise stop
SYDNEY: 8 to 12 percent in 2023
MELBOURNE: 2 to 6 percent in 2023
BRISBANE: 3 to 7 percent in 2023
PERTH: 9 to 13 percent in 2023
ADELAIDE: 1 to 4 percent in 2023
HOBART: Zero to 4 percent in 2023
DARWIN: Minus 4 to plus 1 percent in 2023
CANBERRA: Minus 3 to plus 2 percent in 2023
SQM Research forecasts for real estate prices based on Reserve Bank holding cash rate at 4 percent or less before cutting rates in 2023 and inflation peaking at 8 percent
ANZ and Westpac both expect the RBA cash rate to hit an 11-year high of 3.85 percent in May 2023.
But the futures market is less concerned, forecasting a spot rate of 3.6 percent by July, after inflation rose 6.9 percent in the year to October — down from a 32-year high of 7, 3 percent in September.
Mr Christopher said a cash interest rate spike of less than 4 per cent meant there would be no foreclosure of those unable to repay their mortgage.
His optimistic forecasts are also based on a rate cut by the Reserve Bank in the second half of 2023.
SQM Research’s projections are based on inflation peaking at 8 percent, a level that is still more than double the RBA target of 2 to 3 percent.
“It will undoubtedly be a very challenging year for the RBA to walk on the tightrope and make a soft landing for the Australian economy,” said Christopher.
“But contrary to current popular opinion, I think they will succeed.”
Rental vacancies are still tight with just 1 percent of homes available in Australia’s capital markets, data from SQM Research showed.
Mr Christopher expects rents to continue to rise until the end of 2023, when more new homes will have been completed, increasing supply.
High rents would also encourage more renters to buy their first home, despite a series of interest rate hikes.
Sydney has a slightly higher than average rental vacancy rate of 1.3 percent, but during the year to November, median weekly rents rose 28.4 percent to $695.81, with this figure covering both houses and apartments.
Sydney has a slightly higher than average rental vacancy rate of 1.3 percent, but during the year to November, median weekly rents increased by 28.4 percent to $695.81, with this figure covering both houses and apartments ( photo)
Melbourne, with a vacancy rate of 1.5 percent, saw rents rise 22.8 percent to $512.89.
Brisbane, where the rental vacancy rate is 0.8 percent, has experienced a rent increase of 24.5 percent to $572.40.
Perth, with an even tighter vacancy rate of 0.4 percent, has seen rents rise 18.3 percent to $553.49.
Adelaide also has a vacancy rate of 0.4 percent and rents are up 20.6 percent to $494.46.
A Finder poll of 40 economists found that 88 percent of them expect the RBA to raise interest rates by 0.25 percentage points next Tuesday, bringing the cash rate to a 10-year high of 3.1 percent.
The big four banks are also forecasting a 25 basis point rate hike for December, which would be the eighth monthly hike in a row.