Published 20 September 2023
If you have been following the Australian property market over recent years, you will know there have been a lot of price fluctuations and mixed messages.
Despite what some headlines may say (and they all seem to say different things), our view is that right now will be one of the best times to buy for quite a few years.
Here’s a look at what’s going on and an explanation around why a savvy purchase made in 2023 is likely to deliver better returns than if you wait until this time next year:
The current status of the property market
In 2023, while average home values are still rising across the country, growth has gone from stratospheric to so/so. There are a few factors that are keeping things relatively even:
- Interest rates and inflation are putting some buyers off making a purchase
- Stock on the market is limited, which is keeping competition steady amongst cash-ready buyers
- Demand from overseas buyers and new immigrants is high
- Rental vacancies are low meaning investment homes and apartments are offering attractive yield
- New build approvals are low, so there is less choice for buyers
If you think of property performance in terms of a clock, with 12 being the peak of price rises and six reflecting a period of inactivity, current data shows the hands are a lot closer to six than 12. Prices are not falling and auction clearance rates are reasonably strong, but home values are not going through the roof either.
Four reasons to buy at the end of 2023
So the property market is relatively lacklustre at the moment. This means it’s a great time to get in and buy.
Take a look at why you might decide to make a move sooner rather than later.
1. Interest rates are nearing their peak.
Inflation in the June quarter this year was only at 6% and is predicted to continue to slow.
The Reserve Bank raised interest rates in an effort to curb inflation and their efforts appear to be paying off. It’s too early to say for sure, but experts from the major banks are predicting they will begin to drop next year. There are already signs of this, with rates being left on hold in July and August.
Lower interest rates mean cheaper money, and this instigates buyer activity. While rates are higher, if you can afford to invest, it’s a great time. The silver lining of high rates is that you will find your loan more affordable over time if you have a variable rate that starts to drop.
2. Construction costs are coming under control
Meanwhile, signs of inflation in the construction industry are easing as well. At the peak, building costs were out of control thanks to shortages of labour and material. Sadly, this caused many construction companies to collapse.
The flip side of this coin is that developers and companies that remain have proven they can stay the course through difficult economic times. They have more workers to choose from and are finally finding it easier to budget correctly for projects.
If you’re looking to invest in a new development and choose a well-established provider to work with, the ease in inflation means you can be more confident about your decision.
3. Relatively low activity
While the bottom hasn’t fallen out of the real estate market, agents are definitely working a little harder at the moment to find buyers. If you can make a purchase now, you will have the advantage when the time comes to negotiate.
4. Trends and traditions
Historically, periods of high interest rates and inflation are followed by market peaks. Consider the period after the GFC in Australia, which saw house prices increase.
Buying now means you’ll experience the calm before the storm and can look forward to positive returns when the market picks up.
The aim of buying real estate is to make money. While others are being cautious, it can pay to take action.
If you’d like to explore property investment options for 2023, visit Landen’s Estates, or get in touch with us today.