Should you wait until 2023 to buy a property? – Canstar

Property prices are predicted to fall in 2023 – should you wait to buy? Four experts share their views.

Property price predictions are constantly making headlines and forecasts made by Commonwealth Bank recently were no different. The CBA said it is expecting prices to increase a further 7% throughout 2022, before dropping by 10% in 2023. CBA’s Head of Australian Economics, Gareth Aird, described the Australian housing market as being in “the twilight of an incredible boom that has been fuelled by record-low mortgage rates”.

So what does this mean for anyone thinking about buying property in the next year – should they wait until 2023? That’s the question we posed to four property experts. Here’s what they had to say.

Cate Bakos

Lender forecasts have proven to be a dangerous thing in recent times. Take 2020, for example, when our major lenders predicted losses that didn’t eventuate.

At the onset of the pandemic, our property-related headlines were broadly that of doom and gloom. Buyers were justifiably fearful, job insecurity was palpable and property transaction decisions were put on hold by both sellers and buyers. It was a challenging time because we had only rebounded a downturn 10 months prior.

It is important for us to remember the factors that fuelled our market recovery after May 18, 2019, however. Two very powerful changes spelled a dramatic about-face for our property markets at the time. The removal of the threat of tax reform (specifically changes to negative gearing and capital gains tax) and the loosening of credit, as the Banking Royal Commission became a distant memory, worked in perfect synchronicity with record-low interest rates.

Those who were in the market at the time will remember only too well how quickly our market picked up pace from June 2019 until the onset of the pandemic. The market really did feel as though it was on steroids.

Fast-forward to now, the same favourable conditions remain. Credit is not squeezed. Loan servicing rates have tightened by a marginal amount in comparison to the highs of pre-2019. Lenders have the appetite to lend, the cash rate remains low, our international borders will reopen and employment is within a healthy range.

Buyers who are considering timing the market to capitalise on future price falls should ask themselves what it could mean for them if the CBA’s predictions are wrong? The past two years have taught many buyers a harsh lesson about following predictions. So many buyers are now priced out of markets that they could have afforded had they not waited for a predicted downturn.

Cate Bakos is Founder of Cate Bakos Property, a boutique and independent Melbourne buyers agency firm. She is a co-host of the podcast series The Property Planner, Buyer and Professor and also runs an in-house podcast called The Property Diaries.

Chris Gray

Most people regret not buying more property when they look back in hindsight, yet at the time they sat on the fence and had numerous excuses for not making a decision. It’s always easier to do nothing than take some positive action.

The banks and the economists haven’t had a great track record of predicting the future and so I take them all with a pinch of salt. They thought there was going to be a massive crash with COVID-19 in 2020 and they thought there would only be modest rises in 2021 – none of which happened.

I’ve invested in property for almost 30 years, personally own more than $20 million worth of property, and I have bought in booms, busts and flat periods. I’m no cleverer than anyone else, I just took more action than most other people, because I was unemotional and looked at the long term.

My golden rule is to buy when:

1. The bank will give you a mortgage
2. You can buy at a conservative valuation price and
3. You have enough cash buffer to get you through the next few years

These have been the excuses in recent years:

2017 – the market is peaking and about to crash

2018 – why buy now as the market is going down and I want to pick the bottom

2019 – I can’t get a mortgage because of the credit crunch Royal Banking Commission

2020 – COVID-19 will crash the market

2021 – I’ve missed the boat as the market has already gone up too quick

2022 – the market is going to crash/interest rates are going to rise

And so the cycle of excuses continues. Read a newspaper from the 1960s or 1970s and you’ll probably read exactly the same commentary.

No one knows what the future holds, however residential property markets, especially around the median price around our major capital cities, have risen in value from decade to decade.

Please don’t look back in 10 years’ time and say I wish I had bought more

Chris Gray is CEO of Your Empire, a buyers’ agency that builds property portfolios for time-poor people. Chris is a qualified accountant, buyers’ agent and mortgage broker.

Bryce Holdaway

My initial response to these headlines is always: What exactly are they referring to? Does it mean every property will drop 10% or just houses? Or do they mean only townhouses and not freestanding houses? Or a combination? Or did they mean just Sydney not Adelaide or perhaps just Melbourne or Perth? Or maybe they meant just a single suburb in one of those cities?

Whilst these headlines always get plenty of media attention – particularly when the largest bank in Australia is mentioned – they rarely ever paint a picture that is helpful for us because we initially conclude it must mean every property will be affected and therefore, we should start to panic. However, the Australian property market is not that simple as it’s made up of hundreds and hundreds of submarkets and rarely do they move in the same direction at the same time.

So the reality is generalised commentary helps no one and this headline is no different.

However, it does serve to remind us that property doesn’t always go up. We’ve had a remarkable run across most major markets since recovering from the initial pandemic shock and history is littered with price corrections after bull runs so whether you should pay attention to the headline depends on answering this question: are you buying for the short term or the long term?

As a short-term speculator, perhaps now is not the right time? I do think that some of the post-pandemic gains will be given back and if your outlook is less than 10 years then I would take the headline seriously. If timing is your play, then it may serve you to wait.

But if you’re an owner-occupier and in it for 10 years or more, you’re likely driven by practical and emotional factors over just market cycle timing as rarely do we make this important decision beyond asking ourselves “Can I afford to buy the house I want in the suburb I want right now – yes or no?”

As an investor, the formula is very simple in any market – buy the right asset, correctly finance it, enter when your cash flow allows and hold for the long term.

So I get that no one wants to buy into falling sentiment but my advice here is let time – not headlines  – do the heavy lifting for you when assessing whether you should be entering the market now.

Bryce Holdaway is co-host of The Property Couch podcast, co-author of The Armchair Guide to Property Investing and partner at Empower Wealth.

Margaret Lomas

When we talk about a drop in housing prices it is critical to understand what this means. In essence, such a forecast is assessing either an entire city or a whole country and applies an across-the-board figure to the cumulative property market.

In practice, property markets don’t often experience the same economic influences, all at the same time. Even in these recent times, where it seems that property in every market has skyrocketed in value, there has been a significant difference between the degree of growth from market to market and from property type to property type. Indeed, some apartment markets have fallen over the past months, yet an assessment of the city in which those apartments exist would indicate that all property has risen in value.

It’s not unusual for a 10% drop to be represented by a 10% fall in the upper third of the property market, a 5% fall in the mid-range market and 10% growth in the affordable markets of one city. The net result is an across-the-board fall of 10%, and yet some properties in that market may have grown during the measurement period.

And so, in response to the question “should I wait till 2023 to buy a property” the answer is it depends on where you want to buy. I expect the very scenario I mentioned to play out – with high-end and mid-range property most definitely carrying the burden of the value drop, while affordable markets in suburbs of cities and some of our bigger regions will hold their own, and likely even grow in value well into 2023.

The trick is to understand the fundamentals well enough to be able to pick those markets with the growth drivers to perform. And that’s easy when you understand that infrastructure, the family demographic, jobs growth and diversifying industry go a long way toward creating demand for property in affordable areas with growing populations.

Margaret Lomas is a qualified financial and investment property adviser, and the founder and director of Destiny Financial Solutions. She is also the author of nine books.