Navigating the 2023 Housing Market: Positive Outlook with Challenges and Opportunities
The residential property market has seen its fair share of ups and downs in recent years, with fluctuating prices and ever-changing market conditions.
However, as we navigate 2023, the market is showing some promising signs of improvement, with a number of factors suggesting a positive outlook for the near future.
Market Showing Signs of Improvement
There are several positive indicators that the housing market is improving. For one, there have been fewer corrections, with the February house value index (HVI) figures rising and March figures also showing improvement. Additionally, auction clearance rates in NSW have been strong. Another positive sign is that interest rate rises are coming to an end, which could help boost the market further.
Lack of Stock
One of the biggest challenges facing the housing market right now is a lack of stock. Development application numbers are down, and project start dates are also lagging therefore taking longer to catch up to market demand. In fact, listings were down more than 20% in March compared to the average, which indicates a huge gap in supply versus demand with an increase in immigration pushing demand to an even higher level.
Investors Encouraged
Despite the challenges posed by the current market, there are still reasons for investors to be entering the market now. Vacancy rates in the Illawarra area, for example, are currently low, hovering around 1%. This suggests a strong demand for rental properties in the area. In addition, minimum periods for finding new tenants are relatively short, which is another positive sign for investors. Investors are also expected to re-enter the market strongly over the next 12-15 months when prices start to increase, and capital gains return.
Rising Building Costs
One challenge that buyers and investors need to be aware of is the rising cost of building. Some builders are quoting 30%-40% increases in materials over the past two years. This should encourage buyers to jump on existing stock as any "new" development has to consider this substantial increase in building costs which ultimately will be built into the selling price. Getting in first to any release is key for getting the most affordable price of any upcoming development as price rises throughout the selling period of a project is likely to occur due to the 1 – 2 year construction period.
Enter the Market with Confidence
Despite these challenges, the Commissioner is focused on improving the industry, which should give buyers and investors’ confidence. It's essential to ask yourself whether the property will be worth more or less when the project is complete from the time of purchase. A firm start date is also important, and it's crucial to pick the right developer builder. Research is key to finding the right person or company to trust with your future property asset.
In conclusion, the housing market is showing signs of improvement and gives reason for optimism. Staying informed and attuned to the market's fluctuations is crucial, as it instils confidence when entering the market.
