Should I buy a house now or should I wait until 2023-2024?

Property prices are predicted to continue falling and more rate hikes are likely – does that mean you should wait to buy? Four experts share their views.

Property price predictions are constantly making headlines and the consensus seems to be that prices are likely to continue falling in 2023. Just last week, investment and advisory group Jarden announced it was expecting Australian home prices to tumble another 15% this year. Analysts Carlos Cacho and Anthony Malouf said the Reserve Bank’s “hawkish” rate hikes to keep inflation under control were a key reason we are likely to see prices decline further. The pair predicted the RBA will increase interest rates to 4.1% by May. All of the big four banks are also expecting further rate hikes over the next few months.

Many of the major banks are also predicting prices will continue falling. Westpac, for example, thinks prices nationally will fall by 8% in 2023. And NAB sees prices declining by another 11% this year across the capitals and says this primarily reflects reduced borrowing power and affordability constraints rather than an oversupply of housing.

So what does all this mean for anyone thinking about buying property – should they wait until late 2023 or early 2024? That’s the question we posed to four property experts. Here’s what they had to say.

Cate Bakos

The banks are justified in forecasting more rate hikes but following the February cash rate increase I don’t believe we are in for too many more increases. US inflation figures are indicating a slowdown and, while we don’t completely mirror the US, its data is often a leading indicator for us. In addition, our bond markets are pointing towards an equilibrium cash rate somewhere around 3.8%, which is not that far from where the cash rate sits today.

Lenders are also offering competitive rates – a sure sign that they are hurting because of reduced loan activity since the cash rate began increasing. Buyers are more cautious and sales activity is down.

The Australian Prudential Regulation Authority (APRA) increased buffer rates from 2.5% to 3% when it became clear that our record low interest rates were not a realistic long-term rate for consumers to bank on. Now that we have experienced rate hikes, our regulator may step in with a reduced buffer rate; therefore easing the assessment rate for new loans and refinance loans.

Combined with the imminent easing of interest rate increases, our low stock levels are contributing to a heightened sense of demand from buyers. The demand-supply ratio is strong given our new listing activity is down almost 25% nationally (compared to five-year averages for this same time of the year). Currently, we are seeing particularly competitive buying activity for quality, renovated properties and for this segment of the market, I forecast an increase in capital growth for renovated family homes throughout 2023.

Investor activity is holding firm, although still not at the heady levels of pre-2014. Credit has been tougher to obtain for investors and the increased servicing rates have exacerbated this. Attractive rental returns and tighter vacancy rates may continue to entice investors, but credit availability remains the challenge and onerous rental reforms in some states present a disincentive.

Plenty of buyers are keen to purchase but are waiting on the sidelines for the magic bell to ring, signalling a trough and promising optimal timing for those opportunistic buyers. Unfortunately, it doesn’t work like that and as we learnt from post-GFC and COVID-19, sentiment counts for everything. Once the herd feels that it’s a favourable time to buy, I believe we’ll see value growth yet again.

The question is, will market confidence return in 2023 or will our jittery conditions last through to 2024? For those who feel the latter, waiting it out until 2024 may prove to be lucrative, but I believe our market confidence will return when the cash rate stabilises, and I believe that will be in 2023. If my prediction is correct, those who are waiting for the bell in 2024 may be disappointed, finding themselves priced out of markets that they could have afforded.

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

If you can accurately predict the ups and downs of the property market and time it perfectly, you probably wouldn’t be reading this article, you would be a multi-millionaire and sitting on your mega yacht somewhere overseas.

For the rest of the mere mortals who haven’t got a crystal ball, the golden rule is to buy when (1) you can afford to buy and (2) you can afford to hold on for the long term, because that’s what home ownership and investing is all about when it comes to property.

Sure, many of the banks are predicting the market to fall this year and interest rates to rise, but since when have the banks got their predictions right? They certainly haven’t over the past few years. If you do wait, sure property prices might fall slightly, but if interest rates do continue to rise you’ll be able to afford less (due to serviceability constraints) and so you’ll probably still struggle to buy the property you really want.

Some of the research houses are predicting property price increases this year. SQM Research, for example, says prices could rise as much as 5% to 10%+ in some areas, assuming the cash rate and inflation peak at 4% and 8% respectively and then begin to fall.

There are plenty of people who mistimed the last upswing and missed out. They are still cashed up and ready to go, with many buying now.

Remember what you learnt at school about supply and demand. If you buy now when no one else is buying you get to buy a better property in a better location for a cheaper price. Wait till the market improves and you’ll get a worse property in a worse location for a higher price as the market is flooded with other buyers. What would you prefer?

It sounds simple and it is. I’ve been investing in property in multiple countries for 30 years and I’ve hosted more than 400 TV shows on Sky News Business, interviewing some of the best experts in the country and the best advice I’ve heard time and time again is around supply and demand – if there’s a limited supply and there’s plenty of demand from people who have money, prices will rise over the long term.

So, no matter whether you’re looking for a home, investment property or holiday home, no matter whether you’re rich or poor, high income or low income, young or old, you’re generally always better off buying now rather than later.

Make sure you pay to get some independent advice specific to you, to make sure you can afford it and can afford to hold on in the event of surprise events and then just go and do it.

I’m yet to find anyone that really regretted making a decision to buy. However, I’ve heard thousands of stories of people who wished they did buy earlier.

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

Reasons why you should “wait and see” have been a constant narrative throughout the 24 years since I bought my first property back in 1999 including the introduction of the GST, changing governments, the GFC, depreciation rule tweaks, limits on interest-only loans and, of course, a pandemic to name a few… and 2023 is no different.

Again, we are being cautioned by forecasters to “wait and see” as property prices “will continue to fall” as a result of the RBA’s hawkish monetary policy. But which properties are they actually talking about? Do they mean every single property will fall? Equally? In all states? In all suburbs? Every street? Will that also mean that no properties will grow in value either? Surely not.

These bearish headlines simply serve as clickbait because the fact that our property market is so diverse and made up of hundreds and hundreds of submarkets means it’s illogical to conclude this generalised commentary will dictate the movement of every property in a complex market.

So if your job is secure, you can get a loan, your household budget is in check and you have a buffer in place then why would you wait?

I think it actually is a good idea to buy now and not wait until 2024.

If you’re an investor or an owner-occupier there is an opportunity if you have a long-term outlook. We have a shortage of properties to buy right across the country, our rental markets are close to crisis in large parts of the nation and very tight in others, and we haven’t even seen the demand side impacts of re-opening our borders to increased immigration really kick in yet.

Buying property is not like buying shares where you can decide and transact on the same day.  There are much longer lead times required to just get to the starting line and stock is tight in most major locations, so transacting may take longer than you think to get into the market for the few properties worth buying and if left too late the crowds will soon be joining you.

I promise you, despite the fluctuations in value over time, you will look back in the future and be glad you bought in a market when others were fearful if you follow this simple mantra – buy the right property, correctly finance it, hold it for the long term and buy when cashflow allows… not when headlines are favourable.

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

There is no question that we are going to see a shift in prices in the coming few months in some areas. This includes those areas that saw extreme price pressure toward the middle of 2022 – the middle-ring areas of Sydney and Melbourne, the inner ring of Adelaide and Brisbane and family demographic rich suburbs in most of our capital cities.

We also saw this price pressure in larger regional centers as they experienced the pent-up demand which came from the work-from-home phenomenon. This price pressure emanated from a combination of factors that we hadn’t seen before – extremely low rates, a change in how we worked and commuted and a housing undersupply.

Now, a different set of factors is having the reverse effect on these same areas – higher rates with an unpredictable end point, slightly improved supply pipelines in some areas and prices that are out of reach of the borrowing capacity of many. These factors have created a swift halt to the seemingly endless upward trajectory of property prices.

The result will be a decrease in demand and a discounting of prices for those buyers who need to sell now, creating downward pressure on prices in the shorter term.

Having said that, there are still areas that aren’t being affected by this reversal, specifically the affordable suburbs in Adelaide and Perth, where incomes are still more than sufficient to service mortgages and where strong rental yields are presenting an excellent yield for potential investors. In these markets, the competition between owner-occupiers and investors continues to underpin demand and create a solid floor under prices.

Home buyers in larger cities could wait till 2024 and find that prices have further softened, or at least not increased. The trick will be to not wait too long because when we start seeing interest rate cuts, the turnaround back to growth may be quick. Investors generally tend to pounce under those circumstances and a home buyer waiting for the right moment may be too late to access a property at the bottom.

However, in those areas where a mortgage on a property is still within the affordable range of those who live and work in them (as mentioned above, many suburbs in Adelaide and Perth for example), I don’t see a softening coming and now would be a better time than later. Though relative rental yields fall as interest rates go up, these areas still present effective investing, and investors who are sitting on increased own home equity from the recent boom will be active and keen to secure strong yielding properties.

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.

Cover image source: SewCream/Shutterstock.com

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