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An Australian network has forecast some changes to take place in the property market over the next 12 months.
The LJ Hooker 2023 Trends Report has identified four major trends to occur over the coming year, thanks to a shift towards the next phase of the property market cycle.
The forecasts follow two years of transition for property markets Australia-wide through a wide range of conditions, acknowledged LJ Hooker head of research Mathew Tiller.
And with affordability biting and interest rates rising, the behaviour of owner-occupiers, first home buyers, investors, and tenants alike is continuing to change.
So, what can the industry expect from the coming 12 months?
Trend #1: Tenants to buy and investors to return in a tight rental market
According to the network, rental markets will remain tight in 2023, thanks to the arrival of more international workers and students, while supply remains steady.
With rents expected to continue climbing, at a time when sales prices are softening, LJ Hooker has forecast that those tenants who have been budgeting to buy a home will bring forward their purchasing decisions.
“Higher days on market and vendor discounting will make it easier to make the leap from renter to home owner over the coming year,” the network’s head of research, Mathew Tiller, commented.
Potential for stronger rental returns (and therefore, yields) will also have the effect of bringing more investors into the market, also thanks to softening sales prices.
“The combination of these factors, along with the positive outlook for rental markets over the medium term, will inevitably see investors return to purchase more properties in 2023,” Mr Tiller said.
Trend #2: New and renovated homes will stay popular
As construction costs continue to climb with no reprieve in sight, home owners and would-be buyers will start to think twice about undertaking their own renovation projects.
Not only are costs becoming increasingly burdensome, but the lack of available tradespeople to undertake work or builders to build a home can add unnecessary stress, time and cost to projects.
“Buyers are expected to seek out and prefer recently renovated or newly built homes instead of undertaking a project themselves on an older existing home or purchasing a vacant land lot,” the report laid out.
Trend #3: Population changes will drive market
Closed borders (both domestic and international) for an extended period throughout the COVID-19 pandemic have had a huge impact on migration patterns since 2020.
Now, with regional migration starting to settle and borders reopened to international visitors, new residents, workers, and students, LJ Hooker expects the migration trend to have a “significant” influence on the country’s housing markets over the next 12 months.
According to the report, “it will initially have the most impact on the already tight rental markets across the country as those new to the country tend to rent first, settle into life here and then purchase a property”.
With higher tenant demand — and the already mentioned ongoing lack of new stock — the network is predicting rents will continue to grow “at double-digit rates in some of our tightest regional markets and capital cities over the coming year”.
According to Mr Tiller, “whether it’s people looking for more affordable housing options outside our capital cities, moving between capital cities for work opportunities or into a smaller regional community to get away from the hustle and bustle, it will have a major impact on the market”.
Trend #4: Home owners to seek out advice as they watch for a market upswing
With many markets across the country stalling this spring, the network is not expectant of any uplift before the end of 2022.
But, even so, LJ Hooker has acknowledged that the profession remains busy conducting home appraisals and advising home owners in their respective areas on local market conditions.
The group is anticipating that these same home owners will use the remainder of the year to gather information about their local market performance and prepare their homes to list during the first half of 2023.
According to Mr Tiller, home owners “have adopted a wait-and-see approach” to selling.
“So we have identified a new trend, which we expect will continue in 2023, where people are more eager to understand what is happening in their local market. This also means having their property appraised more regularly as they carefully watch for signs of the next market cycle phase,” he said.
ABOUT THE AUTHOR
Grace Ormsby
Grace is a journalist across Momentum property and investment brands. Grace joined Momentum Media in 2018, bringing with her a Bachelor of Laws and a Bachelor of Communication (Journalism) from the University of Newcastle. She’s passionate about delivering easy to digest information and content relevant to her key audiences and stakeholders.
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