What Does the Property Downturn Mean for Buyers?

Following a peak in May 2022, CoreLogic’s national Home Value Index fell 5.3 per cent over the calendar year. That begs the question: if prices continue to plummet, will 2023 be a good year to take the plunge into the property market?  

The current downturn can be blamed on higher interest rates, household debt, and the erosion of savings, among other contributors. An increase in inflationary pressures and post-lockdown spending are also to blame, making it more difficult to save for a deposit.  

While the overall market is experiencing a downturn, not all areas of Australia are impacted in the same way. Some areas are seeing steeper drops in prices than others, while the market is also experiencing a slow period following higher sales activity during the boom in 2020 and 2021.  

Will prices continue to fall? 

At this stage, it’s unlikely the market has bottomed out. A further cash rate increase of 3.1 per cent is predicted to continue driving prices lower over the course of 2023.  

Though prices continue to fall, buyers are showing hesitation. First home buyer activity in Victoria is currently at its lowest point in three years. Many are waiting to see if prices drop any lower, or harbour concerns about being able to afford mortgage repayments while interest rates continue to rise. 

This has led to a lot of hopeful first-time homeowners turning to their parents for financial assistance, putting down a smaller deposit, or compromising on the size of the home. Fewer buyers are also putting down a 20 per cent deposit compared to before the pandemic. 

The Australian government has introduced various schemes and grants to assist first-time homeowners to get their foot in the door, including specific schemes for people looking to buy their first home. Those eligible for a scheme only require a small deposit, sometimes as low as two per cent. 

At the end of the day, the downturn brings lower prices but higher interest rates on mortgage repayments. The market is constantly in flux, but it’s best to get in as soon as it’s financially viable to you.