2023 Property Wrap Up – The Year in Review - December 2023
December 26, 2023 / Written by Terry Ryder
By Guest Blogger, Terry Ryder, founder,
hotspotting.com.au and propertyU
It was a much tougher year for home buyers and investors in 2023, in the face of 13 interest rate rises. Let's take a look at what the major commentators were saying at the beginning of the year.
And then evaluate how it all panned out during the year.
Early in 2023 the usual suspects (the Big 4 banks and other corporate entities) all forecast price decline. The basic rationale was that interest rates were rising and that would cause prices to fall. The standard prediction was a 15-20% drop in house prices.
Meanwhile, specialist real estate analysts and property professionals saw things differently. At Hotspotting we forecast a year of moderate to strong growth in most, but not all, property markets across Australia.
Just as 2023 defied the forecasts of economists and news media, delivering solid price growth in most jurisdictions (with a national average around 8% for houses and 6% for units), 2024 will do better that the pessimistic predictions that emerged late in 2023.
Those who predicted significant price decline for 2023 and 2024 have something in common: they all believe the biggest factor is interest rates. In the mindset of bank economists, movements in interest rates dictate what will happen with dwelling prices – although history proves that perception to be false and 2023 provided further confirmation.
There were multiple increases in the cash rate but prices continued to increase in most major markets, proving there were more powerful forces driving prices.
Those elements can be distilled to one word: shortage.
The Australian housing market has shortages of everything that matters: we have been building too few new dwellings, there are too few homes listed for sale and there’s an undersupply of rentals.
The shortage factor has been exacerbated by high population growth, turbocharged by record levels of overseas migrants.
The other factor, which speaks to the mood of the market, is that Australians generally believe in the safety and solidity of bricks and mortar. In times of economic disruption (including interest rate rises, high inflation and a wobbly economy), Australians often turn to real estate for security.
The ultimate outcomes with buyer demand and prices in 2023 really did not surprise us. But perhaps the one major surprise was the level of demand for apartments in key locations. We have previously identified rising demand for units as a trend, but the strength of this phenomenon as the year progressed exceeded our expectations.
And, as we consider prospects for 2024, there are no remedies to the under-supply in sight. The building industry has myriad problems and can’t produce homes fast enough. All levels of government, but state governments in particular, stymie development with restrictive taxes and red tape which slows everything down. Policy changes are invariably detrimental to investors which deters the cohort that supplies 90% of the homes people rent - and that worsens the rental shortage.
The other big factor that will impact 2024 is the steady rise in buyer activity throughout 2023. The year began with weak markets in Sydney, Melbourne and Brisbane, as well as regional NSW, Victoria and Queensland. But as the year evolved, sales activity picked up steadily until, by the September Quarter, these markets were pumping strongly.
This is the momentum that will create a strong start to 2024 in those key cities.
Meanwhile, Western Australia and South Australia and their state capital cities avoided the decline seen elsewhere in 2022 and continued to perform well in 2023. But late in 2023 sales activity started to fade in Perth - the first signs of decline after three growth years. Adelaide, meanwhile, continued to show steady performance.
The major exceptions to the general theme of strong sales activity and steady price rises are Canberra and Darwin. The ACT and the Northern Territory are the weakest economies in the nation and that is reflected in the anemic property performance.
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