Many property commentators won’t forecast the year ahead and reveal what and/or where they think you should be buying in 2023. What markets are hot? Will there be a boom? Where’s the bust? What should you avoid?
Anna Porter, Suburbanite Principal, Expert Market Commentator and Valuer, shares her thoughts on the year ahead for the Australian Real Estate Market. She gives a non-biased perspective to help not only everyday Australians, but mum and dad investors, time poor executives, savvy investors, first home buyers and more with successful investing in 2023.
As a former valuer, Anna had seen many mortgagee in possessions tear families apart and take away from the hard work of everyday Aussies. She notes that with rising interest rates, increased costs of living and unprecedented times, there has already been a rise in mortgagee in possession sales.
This disheartens her so she now goes out of her way to help individuals avoid the traps of the spruikers and cowboys in the industry.
* Adelaide remains an infrastructure powerhouse. Expect modest growth * The Games won't bail Brisbane out of pain * Construction boom is heading for Perth * Canberra will be the second most stable economy going into 2023 behind Adelaide * The rich are going to get richer in Australia * Darwin & Tasmania to plummet * Window of opportunity in early 2023 * DIY is the new renovation
THE GOOD TIMES KEEP ROLLING IN ADELAIDE
Porter’s firm, Suburbanite, has been buying in Adelaide since 2016 and they expect the good times to keep on rolling in 2023.
“We still have eyes on Adelaide coming into 2023 as it has all the drivers for a solid investment market,” shares Porter.
“The growth may not be double digit over the next twelve months, but Adelaide is still actively in a buoyant growth stage. It {Adelaide} will be the most stable market around the country whilst the other markets feel the pain.”
Porter favours Adelaide as it has low vacancy rates, high rental and sales demand, low days on market and the infrastructure is second to none.
“The recently completed $2.4 billion Royal Adelaide Hospital and neighbouring $1.95 billion redevelopment of the Adelaide Women’s and Children’s Hospital will create an infrastructure powerhouse precinct right in the heart of Adelaide which will reap benefits well into the future,” shares Porter.
“These are just two of the infrastructure pieces that make up the States large infrastructure play,”
“My top tip when considering Adelaide is to stay within half an hour to the city and only look at established properties, nothing off the plan…distance from the CBD is a key player in the Adelaide market as people don’t commute an hour to work in Adelaide like in Sydney and Melbourne as they simply don’t have to.”
THE MUCH DISCUSSED SYDNEY MARKET
The RBA’s December cash rate determination bolstered the cash rate to 3.10% where it will remain until February 2023, before further rate rises are forecasted.
“If we look at the Roy Morgan report around mortgage stress, 22.6% of Australia’s mortgage holders are now at risk,” shares Porter
“This means they’re paying more than a certain proportion (usually 25-45% based on income and spending) of their after-tax household income into their home loan,”
“Sydneysiders carry the highest mortgages in the country so there are many really starting to feel the pinch.”
Porter explains that with mortgage stress comes downward pressure on values because high mortgages and increased cost of living creates an affordability crunch.
“We’re already seeing an increase of properties selling in the commercial sector due to bankruptcy and debt recovery and this will flow through to the residential sector in Sydney in 2023,” warns Anna Porter.
“If someone is looking to invest in NSW, seeking out more affordable locations that have a strong commercial hub with employment drivers would be the way to go such as Newcastle and Wollongong.”
BRISBANE AND THE OLYMPIC GAMES
“The Olympic Games won’t bail Brisbane out of the next 12 months and the next year will be tough for Brisbane – almost a bloodbath,” claims Porter.
“Whilst Brisbane offers a great long term view, increased living costs and rates will put a damper on the market in the short run and we won’t see this turn around for some time,”
Porter warns any buyers going in will need to take a long term view.
“What’s interesting to note is that the rental market has taken a real turn in the sunshine state,” shares Porter.
“We’re starting to see a ‘tenants market’ emerge around Metro Brisbane and the Moreton Bay regions which is a contrast to the ‘landlords market’ observed for many years gone by,”
“Tenants will surprisingly enjoy the power in Brisbane as rental demand surges in other parts of the country.”
PUTTING PERTH ON THE MAP
“Heading over to the Western side of the country, we have eyes on Perth,” shares Porter.
“There’s a construction boom heading for Perth with major projects like the $1.5 Billion Perth City Deal and the $1.4 Billion Perth Hub containing residential towers, hotel accommodation and lifestyle amenities,”
“There’s already been heightened interest in the project with all 1 bedroom units completely sold out,”
“This construction boom is attracting the attention of construction companies, developers and trades who are now looking to Perth to get in on all the action,”
“Perth will still have a subdued year due to the economic climate but the construction boom will likely offset it enough to keep growth in the positive.”
THE NATION’S CAPITAL
According to Porter, the only real downside to Canberra is the high buy in price as investors will need upwards of $900,000 to get a decent property.
“The good news for Canberra? It is strongly backed by government employment which will help it push through the tough times on the horizon for most markets across the country,” says Ms Porter.
“With the recent change in government, many jobs have been refilled and there’s a new influx of people to the area,”
“At Suburbanite, we’re pinning Canberra as the second most stable economy going into 2023 behind Adelaide.”
WHAT’S ON THE WATCH LIST?
“It’s all eyes on Adelaide and Canberra as the most stable markets in these challenging times with potential for a modest amount of growth in Adelaide due to the major projects and job creation in high paying roles in the medical, engineering and technology industries,” shares Porter.
“However, if anyone fancies themselves a developer, Perth is where you should consider putting your hard earned dollar,”
“We’ve witnessed a lot of planning changes in Perth over the past 12-18 months, unlocking a lot of potential in the small development market.”
Institutional investors at the top end of the market will prosper off this time, according to Porter.
“The rich are going to get richer in Australia especially if you’re cashed up now and have access to the amazing opportunities for buyers in the market,” warns Porter.
“Bargain buyers should look to the commercial sector which is yet to feel the full effects of the pandemic,”
“With all the COVID-19 embargo’s on bankruptcy starting to hit the wall, many high end properties are up for sale by the financier – especially in the office and retail sectors.”
Porter sees this as an opportunity for the right investor who can carry the cashflow through the next couple of years.
“This unprecedented opportunity is in the $5 million plus commercial, retail and industrial space,” reveals Porter.
THE WINDOW OF OPPORTUNITY
According to Porter, it’s critical to be mindful that the window of opportunity is in the first quarter of 2023 while the market is already softer, and before borrowing power reduces further.
“Investors with under $500,000 should look to Perth and Adelaide, especially as their borrowing power diminishes,” reveals Anna.
“With this kind of coin you can typically get an older house, under half an hour of the city or a townhouse/villa in closer proximity to the CBD,”
“Be mindful that borrowing power is reducing quicker than the market is softening.”
Porter has seen first hand that investors who could borrow $1 million three months ago and are now down to a maximum of $700,000.
“As rates continue to rise, and likely continue rising, this will put pressure on borrowing power as banks look at income vs cost of loan,” she explains.
“If an individuals income is not increasing but the cost for them to hold the loan is, this will start to squeeze how much they can borrow.”
THE FUTURE OF VICTORIA
“Victoria falls closely behind Sydney with high mortgage levels and Victorians can also expect widespread mortgage stress on the horizon,” exclaims Anna.
“This will create some downturn in values over the coming year,”
“Some of the Western pockets of Melbourne are still suffering from oversupply and whilst the market has soared ahead in recent years, thus absorbing some of the supply, the softer economy will be less forgiving of the inherent oversupply issues.”
WHAT SHOULD YOU AVOID?
“Darwin is still a concern. Stay away. This is the same as Tasmania which is also lacking major projects and significant job creation,” warns Porter.
“Under the changing economy, Darwin and Tasmania fall in my high risk category and it is expected they will further plummet the market.”
Porter also warns you should show caution around regional markets.
“With the increased cost of living and fuel costs, in particular, the regions are really getting hit the hardest,” shares Porter.
“A lack of buoyancy in the economy will see a correction on the horizon after the regions experienced unprecedented growth,”
“We’ve seen this play out over the back end of 2022 where the likes of Ballina on the popular NSW North Coast has declined by more than 9 per cent in the past 12 months.”
ANNA’S TOP TIPS FOR YOUNG PLAYERS
According to Porter, ‘DIY’ is the way to go over a bigger renovation as we continue to fall victim to trade shortages and inflated construction costs.
“Doing it yourself is the new renovation for 2023 and you’d be surprised at how much value you can add with a bit of paint, landscaping, a tidy up of the fencing, updates to light fittings, curtains and blinds,” she shares.
“These are all works you can do yourself without engaging tradies to add value for an uptick in 2023.”
Porter strongly warns investors to avoid house and land packages and new builds in 2023 as builders in the market will continually feel the pinch and potentially go under mid build.
“Ultimately, as housing prices are softening across most major capitals, consider getting in now while borrowing power is stronger. If you wait you could miss out completely,” concludes Porter.