The prospect of fewer interest rate hikes in 2023, easing inflation, and an almost 20% spike in December appraisals indicate housing values will likely stabilise this year. 

Wrap of 2022 

In a significant tick of approval for bricks and mortar, many vendors are highly bullish about real estate prospects, with Raine & Horne reporting a staggering 18.65% increase in appraisals across Australia in December 2022 compared to the same month the year before. According to the property group's analysis, the headline acts were Queensland, where appraisals surged a massive 52% and NSW, up by more than 20%.

According to Angus Raine, Executive Chairman, Raine & Horne savvy vendors have recognised that despite softening market conditions in 2022, they are still in front. CoreLogic's national Home Value Index found that dwelling values remain 11.7% above where they were at the onset of COVID (March 2020), while values across the combined regional markets are still up 32.2%. 

Moreover, three capitals kicked plenty of goals for vendors in 2022. In Adelaide, dwelling values increased by 10.1%, in Darwin by 4.3% and 3.6% in Perth.

Angus Raine Executive Chairman, Raine & Horne says a lack of listings has been a stumbling block for real estate activity over the last year. “So, the almost 20% spike in appraisals is very pleasing and an excellent sign that vendors believe market conditions are set to improve in 2023.”

For vendors looking for the next round of capital gains, CoreLogic advises that historically, housing value growth is typically associated with a significant event such as COVID or a combination of stimulatory announcements. Stimulatory events can include falling interest rates, easing credit policies, or favourable government policy outcomes such as substantial infrastructure announcements or first-home buyer incentives. 

 Governments could do more for those working in essential services

 For example, from 23 January 2023, the NSW Government has launched the Shared Equity Home Buyer Helper to make it easier for single parents, older singles, nurses, midwives, paramedics, teachers, early childhood educators and police officers to own a home.

 According to Angus Raine, under the initiative, the NSW Government will contribute a proportion of the purchase price of a property in exchange for an equivalent share of the property. 

“If eligible, the Government will contribute up to 40% of the purchase price of a new home or up to 30% for an existing home.

 “This is a fabulous opportunity for single parents, older buyers, and essential services workers to buy into the Great Australian Dream, especially with the property market stabilising in 2023.  

“I’d also urge other state and territory governments to look at ways to support lower-income Australians, especially those working in our essential services, into a home in 2023.”

APRA can do its bit too

According to CoreLogic, easing credit policies could result from a reduction in APRA’s serviceability buffer. Currently, the banking watchdog requires a 3-percentage point buffer after increasing it from 2.5 percentage points. A lower buffer would reflect an acknowledgment that mortgage rates aren’t likely to rise much further following the recent adjustment from record lows.  

Angus agreed, saying, “The housing sector is the cornerstone of the Australian economy, and any combination of reduced serviceability caps or government support could turn market conditions around quickly and get consumer confidence and economic growth moving again.”  

Australian housing is worth approximately $9.4 trillion, almost three times the value of Australian superannuation funds and more than three times the value of Australian listed stocks. Housing comprises roughly 58% of household wealth and 62% of ADI balance sheets.