December 5, 2022 by Dymphna

Property to pump 9% in 2023?

This guy is usually on the money.

Louis Christopher has been in the property game a long time.

(Almost as long as I have!)

And he heads up one of the best research centres in the country, SQM Research.

Anyway, he was picked up in The AFR this week because he reckons that property is due for a pretty quick rebound.

He reckons the fundamentals are already in place, there are greenshoots emerging, and as soon as the RBA stops hiking rates, property prices should pop:

Sydney house prices could bounce back by up to 9 per cent next year if the Reserve Bank of Australia pauses interest rate rises, keeping the cash rate below 4 per cent according to the Boom and Bust report.

Louis Christopher, managing director of SQM Research and author of the report, said a pause in the rate rise cycle, which is expected to occur as early as June next year, with the cash rate holding steady for the rest of 2023, could ignite a recovery in dwelling prices across the biggest capital cities.

Sydney house prices could surge by as much as 9 per cent next year if the RBA pauses interest rate rises by next June. Janine Barrett

That scenario assumes that interest rates will peak at 4 per cent, inflation hits 8 per cent but falls back to 5 per cent, and the unemployment rate rises but stays below 5 per cent.

“I believe the markets can recover, and they’ve been showing some signs of recovery, such as the modest rise in auction clearance rates and asking prices, even while we’ve had these cash rate increases,” Mr Christopher said.

“If the RBA were to hold it below 4 per cent, given the surge in the economy that accelerated wage increases, I believe that will create grounds for a housing market recovery, albeit a soft one where we would see some single-digit house price rises occur in 2023, or at the very least, a situation where the housing market would stop falling.”

In this base case scenario, Sydney house prices are predicted to rise between 5 per cent and 9 per cent next year, the sharpest gain of any capital city.

“Sydney is expected to lead the recovery driven by the surge in underlying demand for residential property and its diverse economy,” Mr Christopher said.

“Sydney is capturing the lion’s share of net overseas arrivals, people are coming back from the regions and returning into the office environment and the taxation changes made by the NSW government will encourage first-time buyer activity.”

… Nationwide, house prices are forecast to rise between 4 per cent and 7 per cent.

Mr Christopher said the RBA was still expected to increase the interest rate by 0.25 percentage points next month and through the first half of next year but will likely pause when the cash rate hits 3.85 per cent.

This is how his forecasts chart out, in case you’re interested.

And I reckon he’s right. The greenshoots are emerging. The fundamentals are already strong.

Probably the only place where I differ is where I see the interest rate cycle peaking out.

I reckon we’re much closer to the end than most people realise.

I reckon we might get one more this year, and then that might do us. Inflation already looks like it’s peaking.

Which means we could see the market turn, potentially in the first quarter next year.