In what is shaping up to be the deepest correction in property in 30 years, the global housing market is predicted to continue declining in 2023.
The year 2022 will mark the softest property sectors in the nation’s two largest cities since the 1990-91 recession, according to new research on failed auction results.
Sydney property values tumbled by 12.3 percent through 2022, according to CoreLogic’s daily measure, with a drop of 1.4 percent in December alone.
Even though property values have fallen, they are still 10 per cent higher than they were pre-COVID due to a strong rise between mid-2020 and the end of 2021.
A sharp increase in official interest rates since May has contributed to the softness, as the Reserve Bank raised the cash rate from 0.1 to 3.1% since then. As a result of high inflation and falling real wages, households are also having difficulty pushing up property prices, which rose almost 30 percent during the pandemic.
It is predicted that house prices will continue to fall through 2023 by NAB economists.
“We expect that house prices will continue to decline well into 2023, with further rate rises likely and as the economy slows. From their 2022 peak, we expect prices will fall by around 20 per cent,” they said.
A new study suggests that those considering selling their property via auction should be cautious about overly aggressive reserve prices in the new year.
Researchers from four university departments, including Kristle Cortes of the University of NSW, examined house listings from 2007 to 2020, covering both auctions and private sales.
In those cases, 83 percent of properties sold at the first auction, either under the hammer or through negotiation with the highest bidder.
In comparison to homes sold by private treaty, the price of houses sold at their first auction increased by 1.2%. There is, however, a 2.6% drop in the amount they ultimately get for their house if the property fails to sell at auction or there are no bids.
If a property fails to sell at auction, its chances of selling below a round number are 6.6 percentage points greater than if it sells just above it.
In the study, researchers found that properties that don’t sell at their first auction leave a “stench” for buyers at subsequent auctions.
“Auction failures create an embarrassing but temporary ‘bad smell’ around the property itself,” they found.
“Stigma, the vague sense that perhaps there might be something wrong with the property, can explain our findings.”
In addition, new laws could lead to an increase in property listings in the new year.
As of tomorrow, more older Australians who are downsizing can transfer their home sale proceeds to their superannuation accounts.
Under the federal downsizer program, people can save $300,000 from the sale of their home into a super account by reducing the eligibility age to 55. In addition to avoiding super deposit caps, couples can also attract a lower tax rate if they put together $600,000 in super.
To qualify, they must have owned the house for at least 10 years.
According to Treasurer Jim Chalmers, the change will boost super and boost housing.
“Expansion of the downsizer scheme allows more Australians to use the equity they’ve built up in their homes to plan for retirement,” he said.
“The downsizer scheme has the added benefit of freeing up housing stock for young families and individuals looking to buy a home.”
Foreigners who violate foreign investment laws covering residential properties will also face higher penalties in the new year.
Over the next three and a half years, the penalties are expected to generate $2.3 million in extra revenue.