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[NEW VIDEO]: The Melbourne Residential Property Market Update December 2022

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Why landlords will be LAUGHING next year as property prices increase and a housing shortage continues to push up rents!

  • SQM Research is expecting strong property price rises in 2023 as rate rises stop
  • Reserve Bank was also tipped to cut interest rates in second half of next year
  • This could see Sydney's median home prices rise by 8 to 12 per cent in 2023
  • Managing director Louis Christopher said tight rental market to spur recovery

Investor landlords are set to benefit next year as house prices start rising again, a data analyst says.

SQM Research is predicting some double-digit home price rises in 2023, with managing director Louis Christopher forecasting an end to Reserve Bank of Australia rate hikes by the middle of the year - and a return to rate cuts.

'Australian capital city dwelling prices will commence a recovery in 2023 as a result of a pause in the rise of interest rates,' he said.

Sydney home prices were expected to rise by 8 to 12 per cent next year if Reserve Bank interest rates didn't rise beyond 4 per cent - a monetary policy forecast in line with the big banks.

Australia's biggest city was expected to be the biggest beneficiary of a tight rental market, with migrants and international students returning again.

The NSW government is now also giving buyers the option of paying an annual land tax instead of an upfront stamp duty bill in the tens of thousands.

'This recovery in Sydney will be driven by the surge in underlying demand for residential property as a result of the rise in overseas arrivals, the return to the office, the existing shortage of rental accommodation, the new stamp duty/land tax changes and the expected ongoing strength of the Sydney economy,' Mr Christopher said.

Melbourne prices were tipped to grow by a more subdued 2 to 6 per cent as Brisbane prices climbed 3 to 7 per cent.

Perth was tipped to see a much more generous 9 to 13 per cent increase.

The RBA cash rate is now at a nine-year high of 2.85 per cent, following seven consecutive rate rises since May.

This has seen Sydney's median house and unit price plunge by 10.9 per cent since peaking in April, back to $1,025,684, making it by far Australia's worst affected capital city market, CoreLogic data for November showed.

ANZ and Westpac are both expecting the RBA cash rate to hit an 11-year high of 3.85 per cent by May 2023.

But the futures market is less worried, predicting a 3.6 per cent cash rate by July, after inflation in the year to October grew by 6.9 per cent - down from the 32-year high figure of 7.3 per cent in September.

Mr Christopher said a cash rate peak under 4 per cent meant there wouldn't be forced sales from those unable to repay their mortgage.

His optimistic forecasts are also based on the Reserve Bank cutting interest rates in the second half of 2023.

The SQM Research forecasts are based on inflation peaking at 8 per cent, a level still more than double the RBA's 2 to 3 per cent target.

'No doubt it will be a very challenging year for the RBA to walk their tight-rope and pull off a soft landing for the Australian economy,' Mr Christopher said.

'However, contrary to current popular opinion, I believe they will manage to do just that.'

Rental vacancies are still tight with just 1 per cent of homes available across Australia's capital city markets, SQM Research data showed.

Mr Christopher is expecting rents to keep rising until late 2023 by which time more new homes would have been completed, boosting supply.

Expensive rents would also encourage more renters to buy their first home, despite a series of interest rate rises.

Sydney has a slightly higher than average rental vacancy rate of 1.3 per cent but during the year to November, median weekly rents surged by 28.4 per cent to $695.81, with this figure covering both houses and apartments.

Melbourne, with a rental vacancy rate of 1.5 per cent, saw its rents surge by 22.8 per cent to $512.89.

Brisbane, where the rental vacancy rate is 0.8 per cent, has experienced a 24.5 per cent increase in rents to $572.40.

Perth, with an even tighter rental vacancy rate of 0.4 per cent, has seen its rents soar 18.3 per cent to $553.49.

Adelaide also has a rental vacancy rate of 0.4 per cent and has seen its rents climb 20.6 per cent to $494.46.

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