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The Australian Housing Market: What Will Happen in 2023?

By Abodable November 10, 2022, Read time: 6 min

The Australian housing market is one of the most expensive in the world. House prices have been rising steadily for decades, and show no signs of slowing down. The average price of a house in Australia is now over $1 million, and in some cities, like Sydney and Melbourne, prices are closer to $2 million. Recent years have seen many Australians move interstate in droves, which has also greatly fluctuated property prices, rental costs, and the supply and demand of property in certain areas across the nation.

This has led to concerns that the Australian housing market is in a bubble, and that it could crash in the next few years. There have been several predictions of a housing market crash in recent years, but so far they have all been false alarms. However, with house prices continuing to rise, many experts believe that a crash is inevitable. Several factors contribute to this and will be covered below.

Interest rates

Firstly, interest rates have been at historic lows, but have been rising recently and are expected to continue rising in the next few years. This could cause mortgage repayments to become unaffordable for many people, leading to defaults and foreclosures.

The Australian housing market is showing signs of cooling off after years of rapid growth. This is good news for first-home buyers since entering the market can be difficult when prices are rising so quickly. With prices starting to level off, now could be a good time to buy a property.

Property prices around Australia have fallen by an average of 5.4% in the last year, according to new data from CoreLogic. The biggest falls have been in Sydney and Melbourne, where prices are down by 7.4% and 6.1% respectively.

However, it's important to remember that the Australian housing market is still expensive, and prices could start rising again in the future. If you're thinking of buying a property, it's important to plan when making repayments, considering interest rates may continue to rise.


Secondly, there is a large amount of debt associated with the Australian housing market. A lot of this debt is held by investors, who could be forced to sell their properties if interest rates rise and they can no longer afford the repayments. This could cause prices to plummet as investors offload their properties onto the market.

Many Australians have also been taking out loans to invest in property, and if the housing market does crash, they could be left with a lot of debt and no assets to show for it. This could lead to personal bankruptcies and a further decline in house prices.

Owner-occupiers could also find themselves in difficulty if interest rates rise. This is because many people have taken out mortgages with low-interest rates, and will struggle to afford the repayments if rates go up. Another factor that could lead to a housing market crash is decreased income.

This could be caused by a recession or by unemployment. If people can no longer afford to pay their mortgages, then they will be forced to sell their homes. This could lead to a sharp decrease in prices as the market becomes flooded with properties.

Supply and demand

Finally, there is a huge supply of housing units that are currently under construction. If demand for property falls, then these newly-built properties will struggle to find buyers, leading to a saturation of unsold properties and further downward pressure on prices. As previously mentioned, this could be compounded by an increased number of people selling their homes.

As Australia's population grows, so too does its demand for new properties. This is one of the main drivers of housing prices, and if this demand starts to slow down then prices could fall. This is already starting to happen in some areas, such as Sydney and Melbourne, where prices have been falling for the last year or so. This may also be compounded by increased immigration to Australia, which has seen an immigration increase since international borders have re-opened, and is expected to increase in the coming years. 

However, it's important to remember that the Australian housing market is still strong overall. Prices are not expected to fall across the board, but there could be some regional variation.

So far, the Australian housing market has defied predictions of a crash, but with prices continuing to rise and interest rates expected to increase, many experts believe that it is only a matter of time before the bubble bursts. If you're thinking of buying a property in Australia, consider these factors, but also consider your circumstances.

Hope at the end of the tunnel

You've no doubt noticed the serious tone throughout this article. It's important to reiterate that just because the property market might be in upset, it's not necessarily a bad time to buy a home.

Over the entire course of paying off your mortgage, you'll no doubt find that interest rates will rise and fall multiple times it's the natural way of the market. If you've been saving up a house deposit for a while now and 2023 was looking to be your year, but you're now hesitating, consider this: is it better for you to pay for rent on someone else's house for another year?

As a factor in the cost of living, rent typically only rises over time. Just because interest rates may be higher now, if you're in a good position to buy your own place, 2023 may still be the best time for you.

Summing up

The property market fluctuates all the time, and signs indicate a potential crash, but it could also be the market cooling off after a hot market from 2020-2021. Interest rates are on the rise, as is the cost of living, and the amount of property debt people have accrued. Rates will eventually plateau and fall again, so be mindful not to let that affect you when making long-term decisions; there are positives and negatives to buying when interest rates are both low and high.

Australia is a growing nation, as is its property demand. Builders and developers are always trying to keep up with this increasing demand, and while demand could drop off, we'll likely see a steady rise again. Always exercise caution when purchasing property, but also do the same when reading headlines in the media designed to scare and incite fear.