Interesting predictions have come out this week looking at house value trends over the next couple of years. It’s obviously very worthwhile looking ahead and taking the time to analyse the implications of possible changes in social and economic activity, but at the same time, the last couple of years have been a graphic demonstration that in reality, we can never know what’s around the corner.
The expectation is that residential property values will continue to rise throughout 2022 by anything up to 6%. That’s on top of the increase of over 22% we have seen over the last twelve months that could reach 27% growth by the end of the year.
The belief is growth will be impacted by an expected rise in interest rates in 2023 which may lead to values turning around by around six percent. That’s prompted some excited headlines about ‘plunging’ prices.
I’ve got a couple of things to say about that. First of all, ‘plunging’? I think not. That’s not me being a pedant, it’s being realistic. Quite frankly it’s unreasonable to expect values, even in the Sydney market, to continue rising and rising. Markets move. We are seeing some easing in growth already down from double-digit rises to a single digit. But it has still been rising.
I agree with the predictions that when interest rates inevitably start to rise, we will see the market start to pinch. But keep it in perspective. If values in 2023 fall by four or five or six percent property owners who have purchased anytime even in the last five years still have the opportunity to make a significant return on their investment.
I recognise that’s news that might motivate some potential buyers to hold off purchasing until 2023 in the hope prices will be more affordable. But equally rising rates might actually offset that affordability. Equally, there will be others who see benefit in securing a property as a long-term investment and to lock in finance before rates move.
These are conversations our team have with clients every day. For both potential vendors and potential purchasers, our experienced agents will dig down to understand the short and long term objectives behind selling or purchasing a property. They will then run through various scenarios in terms of the potential impact of economic and market movements.
The aim is to ensure our clients are fully informed so they can make the right decision for their unique circumstances. We can’t definitively predict the future, but we can help our clients to be empowered about the rationales and reasons behind the decisions they make.