What we foresee for 2023

We’re sure that property has been a hot conversation across many summer barbecues this holiday season and many predictions shared, fears spread and sensational headlines published. Cutting through all the clutter and looking at the data and demand, here’s what we see coming for the year ahead in property.

It’s going to be a wobbly year for a lot of people because of the many conversations and articles out there but the smart money will act now, and those that wait until ‘things calm down’ will likely miss out or miss the full opportunity of what’s coming. All risk comes from a lack of knowledge and this creates an emotion called fear. When you make decisions out of fear you are more likely to make mistakes.

Consider, when the last property ‘boom’ took off, was it the people who already held property or those that started buying when the market moved that saw the greatest return on investment? If you have the means now, invest now, don’t wait until the market cools because we honestly believe you’ll be waiting a long time and will miss the incredible growth opportunities our clients who have invested are currently experiencing and will continue to enjoy over the next decade.

The Sunshine Coast property market – still the top residential property market in the country – will be busy in the next few months but growing over the year and will be even bigger in 2024.

The fundamentals of the property market are strong.

But wait – don’t all the headlines say prices have fallen? They do, but this comes back to the old nugget of ‘median prices’. Keep in mind a median is a ‘middle’ number. In 2021 and the beginning of 2022 we saw much more activity in the higher quintiles of sales prices. Now we are seeing a smaller volume of higher priced sales (which is generally a smaller market anyway). This comes as confidence drops (due to the headlines) and rates go up (noting money is still very ‘cheap’ but the assessment rate is 3% higher than what you would actually pay so getting a loan is much harder, therefore fewer people are seeking loans or being successful). This leaves more activity in the lower priced part of the market. So when you stack all the sales, the middle number is lower. This does not mean real prices have fallen. Yes, there will be people pointing to sales where they sold for much lower than they should have. This happens in any market. Better to look at the selling agent’s competence (or morals) or the sellers reasons rather than call it a ‘market’ response.

Despite dire predictions of recessions and rate rises, Australia will fare well, and at the end of the day people always need somewhere to live and investment properties will continue to be required. Among other economic crises, history shows us that property as an investment class continues to perform well – during stock market crashes property is strong, during the global pandemic property was strong.

Demand continues to vastly outweigh supply, we simply do not have enough property across Australia and particularly the Sunshine Coast to house all the people looking to rent and buy.

Not only are there not a lot of listings and a lot of competition, but for those looking to buy new, the land approvals are so far out and many development projects are being shelved or dramatically delayed that we’re not seeing enough new stock coming to the market. This is only exacerbating the supply imbalance and seeing prices rise for properties and rents due to the growing competition.

It is a tough time for people renting and house hunting due to this supply and demand imbalance and we are seeing a new market of people looking to purchase out of fear – those who want the security that home ownership can bring are looking to buy out of fear that their rental might be sold to an owner occupier and they’d face homelessness.

In short:

Medians are a middle number. When finance is hard to get or confidence falls, the volume of sales falls to lower quintiles, meaning the middle number of sales is also lower. It does not mean that real prices have fallen.

Demand is the highest it’s ever been and increasing at its fastest rate in decades, the undersupply is the largest of any of the 20 largest markets in history, supply is in decline.

It’s a housing EMERGENCY, the need is that great.

What’s ahead?

Well this year suggests to be the reverse of last with an average start and strong finish. 24/25 is poised to see strong gains in capital. Rentals will grow strongly this year and ad infinitum without a solution.

With this level of pent up demand we need a single trigger to see a reversal of what the recent rate rises did to quell purchasing power and confidence. Reduction in interest rates (or several months of stability without indications of increase) or a reduction in the assessment floor rate. With a global recession likely (that would benefit Australia) and rate rises pretty much done, rate reductions are back on the horizon. The next swell is coming, but instead of paddling out, people have their backs to the waves and are leaving the water …

Last point, economists have been constantly wrong on their predictions (especially longer than 6 months). Rises have always come sooner and been more than their forecasts, price ‘falls’ have not been as severe (refer above to medians in both cases anyway). Their models always calculate a more negative outcome.

We continue to believe the Sunshine Coast remains the top residential property market for the year ahead but recognise that there will be an exodus of people purely due to the lack of available property, a significant net increase, yet it’s the demographic and diversity disruption that will continue.

We continue to believe the Sunshine Coast remains the top residential property market for the year ahead but recognise that there will be an exodus of people purely due to the lack of available property. The ‘Manhattan Effect’ as coined by Bernard Salt is in full swing and we will see people with money continue to buy in this region and benefit from its growth. Those that purchase investment properties now can benefit from 0% vacancy rates and growing property values with no signs of slowing down for at least 10 years.

When people consider buying lower priced properties in less popular regions, we recognise that might be a great option for owner occupiers with limited borrowing capacity, but for investors, go where the demand is, and that is on the Sunshine Coast.

For those struggling with the cost of living and increasing repayments, we encourage you to renegotiate with your bank, look at refinance options and speak with finance professionals who can offer advice to help you hold on through this rough patch.

For those looking to leverage the opportunity the market presents, we encourage you to get strategic advice on where and what to invest in – book in a free strategy consultation with our property coaches to see what’s possible for you.