Australian consumers with an interest in real estate have been drowning, lately, in forecasts about big future decreases in real estate values – from the people I call the usual suspects, who have such bad track records in predicting property prices outcomes.
So it’s refreshing to see a high-profile and credible figure actually predicting that property prices will rise in 2023 – and getting considerable media coverage for it.
I’m already on the public record in forecasting growth in house prices in 2023, as is the highly respected analyst Simon Pressley from Propertyology.
And now Louis Christopher of SQM Research has published his annual Housing Boom and Bust report, which broadly forecasts a recovery in property prices in the major cities of Australia.
As is always the case with the Housing Boom and Bust report, Louis Christopher presents a range of scenarios with different estimates of the impacts on property prices.
The four different scenarios presented assume particular outcomes with interest rates, inflation and unemployment.
Under his base case, the one he expects to happen, Christopher broadly assumes that unemployment will not rise very high, that inflation will peak and then come down again, and that the Reserve Bank will stop lifting the official interest rate in the first half of 2023.
Under this base case, he expects house prices to rise in 2023 in all capital cities except Darwin.
He is projecting moderate but solid price growth across Australia generally, with the capital city average being a rise of up to 7%.
According to Christopher, Sydney will do best, with prices potentially rising by almost 10%, with Perth next best with an increase of about 8%.
While this forecast is encouraging for property markets and for real estate consumers, I think he is being quite conservative in his outlook.
I think the price growth we will see in 2023 will be more bullish than the forecasts in the Housing Boom and Bust report.
In particular, I think cities like Adelaide, Brisbane, Perth and Darwin will deliver price growth that exceeds the Louis Christopher forecasts.
The key factors, from a national viewpoint, are …
- a serious shortage of properties which is not being effectively addressed by any government in Australia,
- the record low vacancy rates and upward pressure on residential rents,
- the opening of borders and the intention to increase the number of overseas migrants coming into Australia,
- the strong infrastructure spending occurring across the nation,
- the ongoing strength of the national economy and low rate of unemployment,
- the impact of a series of global sporting events being hosted by Australia from 2023 to 2032,
- and the reality that in times of economic disruption, Australians turn to residential real estate for safety and solidity.
Against that background of national factors, I continue to argue that real estate markets are local in nature, and that specific capital cities and regional centres will out-perform national averages for local reasons.
So, overall, I agree with SQM’s Louis Christopher with his forecast that we are likely to see solid growth in house prices in 2023.