Residential Property
Outlook 2023

The residential property market has seen exceptional growth in recent years, driven in-part by a rebound following lockdown measures in 2021. However, in 2022, lower volumes hit the market as rising interest rates and inflation caused a slowdown. As these factors continue to create uncertainty in the market, the outlook for the residential property market will depend heavily on the impact of further interest rate increases.

If interest rates continue to rise and consumer confidence remains low, the housing market may experience a deeper downturn. Many of the record-low fixed-term mortgages taken out in 2021 are set to expire this year, rolling back into a market where average new variable rates are between 5-6%. This could pose a significant challenge to the stability of the housing market nationwide. While most homeowners will still be able to sell their homes, there may be an increase in supply as some people are forced to sell, which could put further downward pressure on housing prices in Australia.

There is ongoing speculation about the possibility of a housing market crash in Australia. However, it is important to consider market performance in the context of historical price cycles in order to gain a better understanding of what may lie ahead.

The residential property market in Australia is known for its cyclical nature, with periods of growth and decline. While the overall market may currently be experiencing a downturn, it is important to note that not all regions and markets are affected equally. Different states and cities are at different stages of the property cycle, and within each city, there can be variations in property values, with some areas experiencing falling prices, others remaining stable, and some even experiencing price increases.

The current state of the property market in Australia is referred to as the adjustment phase of the property cycle by market commentators. Some experts believe that this correction was necessary, as house prices across the country had risen to unsustainable levels. By historical and global standards, household debt to household income in Australia had reached high levels, driven largely by the size of mortgage debt held by households. While interest rate increases can impact the market, they are only one of the factors that affect home prices.

A property market crash occurs when there are a large number of forced sellers and not enough buyers, resulting in the need to sell at significant discounts. These forced sellers are often also home buyers. They are only forced to sell if they are unable to keep up with their mortgage payments, which can happen when interest rates rise too high. However, it is important to note that despite the current interest rate increases, they are not likely to reach pre-pandemic levels and borrowers should be able to cope. Additionally, a market crash can also occur when unemployment levels are high, but this is not currently the case in Australia.


Until next time.


Jay Bacani
Co-Founder and Director of Manor Real Estate, with over 11 years of real estate experience in the Hills district, Jay says he ‘cannot imagine working anywhere else’. Jay has consistently ranked no.1 in the Hills for most recommended, most sold properties and total sales value since 2016 (as per...