2022 property market wrap up and what lies ahead in 2023

2022 property market wrap up and what lies ahead in 2023

Dec 12, 2022 | by Mark Horvat

The start of 2022 saw Australia’s property cycle rolling into a new phase after several years of unprecedented boom. The shift has brought certain challenges, especially with the current macroeconomic pressures and geopolitical issues thrown into the mix.

We look here at how the year has unfolded so far and explore the outlook for property markets as we count down to 2023.

The property cycle shifts

Early in the year, we saw clear indications that the property cycle was moving into a downturn, with price growth slowing significantly after the meteoric rises of the COVID period.

This natural shift saw properties taking a little longer to sell, with the supply-demand balance starting to tilt subtly away from a staunch seller’s market into more neutral territory.

Back in May, headlines marked the first fall in property prices in almost two years, and the Reserve Bank of Australia (RBA) announced the first of its interest rates hikes after having held the cash rate at record lows for several years.

Inflation, interest and instability

The year has seen global inflationary pressures affecting property markets everywhere, and central banks in many countries have been hiking interest rates in order to bring spiralling costs under control.

Australia has not escaped, with inflation climbing to 7.3% in the third quarter of 2022, the highest it’s been since 1990.1 As the RBA continues to push interest rates up to slow demand and get inflation back to sustainable levels, we are witnessing substantial tightening in the lending environment, with obvious repercussions for the property market.

Geopolitical crises have also affected our cost of living, adding to the natural pressures of the inflationary cycle. The conflict is contributing to a general sense of instability and a consequent drop in consumer confidence.

For a fortunate few, the pandemic was a time for saving, and many Australian households have financial buffers in place to help them weather the economic onslaught that we are experiencing. This, combined with record-low unemployment rates, has meant that despite facing steadily increasing mortgage repayments and day-to-day living expenses, a significant proportion of borrowers are managing relatively well, and we haven’t seen any sudden panic selling to date.

However, the reality is that we are still to see the full effects of the rate rises, which will start to make themselves felt more sharply as they hit bank accounts in the next month or so. For borrowers who were already feeling the financial pinch as a result of the COVID restrictions, there could be more rate-induced pain ahead.

Closing the gap between house and apartment values

One interesting trend that we’ve seen over the year is the narrowing of the gap between house and apartment values.

Through 2021, houses far outstripped units in terms of price growth. The CoreLogic Home Value Index published in January 2022 showed that in Sydney, annual growth for houses stood at 32.7% and for apartments at 18.8%, while in regional NSW, the annual growth figures were 35% and 29.7% for houses and apartments, respectively.2

Fast forward to November 2022, and it’s a different story. Sydney house prices have borne the brunt of the downturn, falling 8.1% over the year, while apartment values have dropped by just 3.9%. In regional NSW, annual growth is currently at 7.8% for houses and 9% for apartments.3

Relative affordability, the renewed influx of migration, and an extremely tight rental market are some of the factors buoying up apartment values.

What to come for the 2023 property market?

Despite six months of falling prices, the latest figures show some easing of these challenging conditions, with the rate of decline slowing from 1.6% in August to 1.2% in October.4 However, as the experts are quick to point out, it is too early to talk about the downturn coming to an end.

Most pundits are predicting that prices will continue to fall across the board for at least another four to six months before beginning to rebound slowly as interest rates stabilise and inflation is brought under control.

One report from the National Australia Bank (NAB) suggests that there is a glimmer of growing consumer optimism, with a small increase in the number of people who think it is a good time to return to the property market.5 It’s a sentiment that is being reflected in improved auction clearance rates across the nation after July’s slump, which in Sydney saw the clearance rate drop to just 53%. It’s currently at 61% and trending upwards.6

Summing up

There is no denying that these are testing times.

Such low unemployment means that some businesses are struggling to find the staff they need to stay afloat. At the same time, many households are already stretched to breaking point with the spiralling costs of living and mortgage repayments.

However, our economy is relatively strong, and the government is continuing to help first-time home buyers into the market with a range of incentives. Interest rates are expected to stabilise in the next six to eight months, and there is every expectation that inflation will start to slow and eventually return to acceptable levels.

In terms of property, there has been a lot of talk in the media about the market crashing and prices plummeting in response to current economic pressures, but property and financial experts prefer to take a less dramatic view of the situation.

The general consensus is that yes, we are experiencing a correction, but even if prices fall by 10-15%, the phenomenal growth of the past few years will still see homeowners and investors comfortably better off than ever before.

Each region across the country has its own challenges, and people are wary of over-committing in the uncertain financial environment.

The frantic demand of the past few years has waned to some degree, but people always need homes, and the property market will continue to provide opportunities for buyers and sellers alike, albeit at a less frenetic pace than in previous years.


1. https://tradingeconomics.com/australia/inflation-cpi
2. https://www.homeloanexperts.com.au/wp-content/uploads/2022/01/CoreLogic-Report-December-2021.pdf
3. https://www.corelogic.com.au/__data/assets/pdf_file/0019/12592/2211_CoreLogic_OctoberHVI_Final.pdf
4. https://www.corelogic.com.au/news-research/news/2022/corelogic-home-value-index-six-months-of-falls-for-australias-residential-property-market
5. https://www.mpamag.com/au/news/general/optimism-returning-to-property-market-says-nab/425954
6. https://www.corelogic.com.au/our-data/auction-results

Other buying, selling and investing articles and resources 

Guide to property investment success in NSW

Selling a house or apartment in NSW eBook

Buying a house or apartment in NSW eBook

Property investment in NSW FAQ’s

What is a property cycle and what drives a change? 

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