2022 was an interesting year for the property market. Interest rates and rental yields increased, while property prices fell. Nonetheless, Australian investors persevered and made it through this challenging year.
We sat down with Bradley Beer, Chief Executive Officer of BMT, and asked him some questions surrounding the property market outlook of 2023 and the latest BMT news.
Read on for Bradley Beer’s insights into the year so far and what may lie ahead.
What did the Australian property market look like in 2022?
The value of the residential real estate market fell from $9.6 trillion in December 2021 to $9.3 trillion in December2022. Australian national housing values fell 5.3 per cent over 2022, the largest calendar-year decline since the Global Financial Crisis in 2008 where values fell 6.4 per cent. The median price of a residential dwelling as of 31 December 2022 was $708,613 with combined capitals at $770,374 and combined regionals at $577,616.
What can we expect from the housing market in 2023?
I expect that property prices will continue to fall as long as interest rates are rising.
It is likely that sales from owners unable to service their loans due to interest rate rises and inflation will increase, with 35 per cent of outstanding housing credit on fixed terms and around two-thirds of these expiring in 2023.
And what about interest rates?
At 7.8 per cent, the Consumer Price Index (CPI) is still well above the RBA’s target of 2-3 per cent. To return inflation to target, the RBA has lifted the cash rate every month from May, with it now sitting at 3.60%, the highest rate in eleven years. It is expected that inflation will return to 4.7 per cent over 2023 and 3.2 per cent over 2024.
How are rental markets performing so far in 2023?
Rental markets have remained firm so far throughout 2023, with the current national rental vacancy rate sitting at a record low of 1.0 per cent.
As of January 2023, gross rental yields were 3.9 per cent, a growth of 0.7 per cent from January 2022.
CoreLogic reported annual growth in Australian rent values of 10.2% in the 12 months to December, a record high. The most rapid annual rise is evident in unit rents across Sydney, Melbourne and Brisbane, where rents have increased around 14 to 17% annually.
What is loan activity looking like?
The percentage of investor loans increased by 5.3 per cent between September 2019 and September 2022. New variable home loan rates for owner occupiers increased from a low of 2.41 per cent in April 2022, to 4.58 per cent in October, notably impacting housing affordability.
While the rate rises are making owner-occupier mortgage repayments less affordable, investors are less impacted thanks to the tax deductibility of interest on investment loans.
How will changes to international borders and migration affect the market?
To ease workforce and skill shortages, the permanent migration quota has been increased from 160,000 to 195,000 in 2023, with all additional spaces allocated to skilled work visas. This will likely further decrease vacancy rates and increase rental yields and house sales.
The reopening of borders has caused interstate and foreign buying activity to resume strongly which will likely continue to grow throughout 2023. There has been increased foreign investment in commercial property, with remaining popularity in the office and industrial sectors.
What’s the latest in BMT news?
In BMT news, we reached a milestone of 800,000 schedules completed since opening our doors in 1997 – an accomplishment we attribute to our valued clients and referrer partners.
In 2022 we also found clients an average of almost ten thousand dollars in depreciation deductions within the first full financial year.
Last August saw BMT’s private equity partners exit, and the executive team acquired one hundred per cent of the company.
This allows us to have full control to drive the future direction of the business. Our strategy focuses on customer service and thorough, accurate reporting, always with the aim to maximise claims and make life easy for our clients and corporate partners.
Now that we are on the other side of the pandemic and have full control of the business, we will continue to find customers the highest compliant deductions while delivering the outstanding customer service that we are known for.
We look forward to seeing what the year will bring.
The information in this article is sourced from CoreLogic and the Reserve Bank of Australia. This article is general in nature and should not be taken as advice or a guaranteed outcome.