The worst may be behind the housing market, industry leaders say
The housing market should even out in the second half of 2023, according to industry leaders and experts.
With eight straight RBA cash rate increases last year and more likely on the way, the market has been uncertain, The Australian reported. That uncertainty has impacted house prices, which have plummeted 5.18% from their pandemic peaks in capital cities, according to data from PropTrack.
However, the broad consensus among industry players is that the worst of the downturn may have passed, The Australian reported.
McGrath chief executive John McGrath thinks the cycle hit its low point during the holiday season, which will lead to stabilisation over the next few months, with a “good possibility” of small upward movement at the end of next year.
“Buyer demand is solid currently, but a layer of nervousness is sitting on top of the lower and middle section of the market awaiting to see where interest rates rest,” he told The Australian.
Ray White chief economist Nerida Conisbee said the cash rate could rise by another 1% this year, but added that the rapid decline in inflation in the US was reassuring.
“I don’t think [property] prices will stop falling as yet … but it is likely that once interest rates hit their peak, at that point we’ll probably start to really see the market stabilise,” Conisbee told The Australian.
Stabilising forces
The Agency chief executive Geoff Lucas told the publication that he thought rate increases would pause after a possible hike in February.
“In February or March, we will see buyer sentiment because they see that this is the end of the current tightening cycle,” Lucas said. “Softness will continue for the first half, I would expect. Then, in the second half, don’t forget, we’ve got almost record rates of immigration … that’s going to underpin prices. I would expect stabilised prices for the remainder of the year.”
While Lucas said a rate cut in the second half was possible, PropTrack economist Angus Moore warned it wasn’t likely.
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“If global growth slows significantly and that then flows through to a worsening outlook for the domestic economy, the RBA may want to start to cut rates towards the back half of next year,” Moore said. “On the current trajectory, that’s not my expectation, and it’s not the Reserve Bank’s expectation, either.”
Mortgage cliff
The biggest uncertainty for the market is the fixed-rate cliff expected in the middle of the year as borrowers who fixed ultra-low rates during the pandemic see their loans roll over to much higher variable rates. Some borrowers may struggle to meet the increased repayments, experts warned. Homeowners in Sydney and Melbourne will feel the most pain, according to a recent Lendi analysis.
With that in mind, CoreLogic head of research Eliza Own said that too many more cash rate hikes would put market stability at risk.
“It would be challenging for the RBA to go much further than 3.85%,” she said.
Conisbee told The Australian that borrowers forced to sell would likely be at the lower end of the market.
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