Navigating the Property Market in 2023: Challenges and Opportunities
Are you a property investor feeling the pressure of today’s challenging market and rising living costs? As a seasoned property investor and Chartered Quantity Surveyor with over 20 years of specialist experience in Tax Depreciation, we understand the difficulties that many families are facing.
Inflation, Growth Slowdown, and Interest Rate Hikes
The RBA is aiming for an inflation target of between 2-3%, but the IMF has slightly downgraded its growth expectations for Australia, with growth slowing from 3.6% in 2022 to an expected 1.6% in 2023. Despite ten interest rate rises (for now), Australia’s property markets have been remarkably resilient.
Decline in Property Price Falls is Slowing down.
The current interest rate hike cycle has triggered the largest and fastest decline in Australian property values since CoreLogic started recording data in the 1980s. The peak-to-trough combined capital city drop of 8.6% (from May 2022 to January 2023) followed a significant 26% uplift in value between September 2020 and April 2022. However, some markets have defied the downward trend. While Sydney and Melbourne have borne the brunt of price falls, other capital cities have been largely spared. Lower listing volumes (fewer properties for sale) are helping protect the market from further downward pressure. While many are concerned about a “fixed rate cliff” ahead, RBA data indicates the majority of mortgage debt is on variable terms. Many people have also been overpaying on their mortgages during the low interest rate cycle.
Solid Auction Clearance Rates
There may be more rate hikes ahead, but our analysis suggests there could be light at the end of the tunnel. The decline in property price falls is slowing down, asking prices are holding steady or increasing, and auction clearance rates are solid.
Stabilisation Phase
Once interest rates peak (and that may not be that far off) and inflation peaks (and that’s probably already happened), consumer confidence will return, and the market will reset as a new property cycle begins. But don’t expect a rapid recovery – the next stage of the cycle is the stabilisation phase.
Tax Depreciation: Maximizing Returns, Minimizing Tax Liability
Despite the challenges of today’s market, Tax Depreciation can help property investors maximize returns and minimize tax liability. At Koste, we specialize in Tax Depreciation and have helped countless property investors navigate the complexities of the market.
Rental Crisis Continues
There is no end in sight for our rental crisis, and rents will continue to skyrocket this year.
In summary, the property market is facing challenges, but there are still opportunities for property investors to succeed. With the help of Tax Depreciation experts like Koste, you can navigate the complexities of the market and maximize your returns while minimizing your tax liability. Despite the rental crisis, the market is showing signs of stabilizing, and once interest rates and inflation peak, the market will reset, and a new property cycle will begin.
