Whether you’re a first homebuyer, second-time purchaser, upsizer, downsizer or whoever, the process of buying a home comes with a range of challenges.
But in 2023 I believe those trials will be a little different compared to previous years. 2022’s market transition was a shock to many as we went from one of the strongest national property price booms ever, to one of the quickest value retractions on record.
So, what are the new challenges facing those who want to purchase in 2023 and how can the impact be cushioned?
Homebuyers in 2023
The most recent analysis by CoreLogic reveals property values have retracted 8.83% since their peak in May 2022. This is the most significant drop in prices since the October 2017 to June 2019 period when prices retracted 8.38%.
Price falls sound like good news for buyers looking to get into the market, but there are negative flow-on affects that need to be considered.
Firstly, buyers will be reluctant to sell when values are down, so expect fewer homes to be available for purchase. Those that do list will be genuine sellers, but most owners will choose to wait out the instability. Less listings means less choice for buyers which will put a floor on price retractions.
Also, financial security will be top of mind given that some have predicted our economy will retract this year. Higher inflation coupled with a financial squeeze could jeopardize a household’s ability to service their loans, particularly if employment takes a hit as businesses consider downsizing.
The other big factor this year is the way our financial landscape has flipped for homebuyers. During 2021, high prices and low interest rates made it difficult to save enough deposit for a purchase – particularly for first homebuyers. Now, rising interest rates coupled with softening prices means cashflow is the concern for those seeking a loan approval. Raising a deposit does you little good if the bank knocks you back on finance.
How to make things easier
What are some of the ways you can overcome the hurdles in 2023?
First and foremost, surround yourself with the right advisory team. This year, more than ever, you will be dealing with a raft of difficulties. Making certain the right legal, accounting and property advisory team are on hand to help will be essential.
And at the top of your advisor list must be an experienced mortgage broker.
Banks are still keen to lend but the loan approval process will be a minefield for those going it alone. As a Melbourne mortgage broker with over 35 years of experience in the finance field, I can tell you that borrowing funds will be one of the most challenging aspects of homebuying in 2023.
A mortgage broker is well positioned to ensure you pull together the right information in a timely manner. We can also provide advice on things you can do early in the process to improve your chances of gaining an approval. Immediate changes to your home budget could prove hugely beneficial when you eventually make a formal home loan application.
This will also be a good year to allow for financial buffers in your budget. Interest rate movements are not over yet. Be certain you can weather potential rate rises without stress or fear.
Next, you may perhaps need to moderate your real estate wish list a little this year. Instead of looking for that dream home now, consider the next purchase a “steppingstone” property. Why? Because your choices will be more limited, and your borrowing capacity has been eroded by rate rises. Don’t worry, things will change and listings number will rise, but that will take time. Instead, plan for this future by buying the right type of property for value growth now, even if it’s not the “perfect” home.
Remember – real estate success is a marathon, not a sprint. Keep your long-term goals in mind while making near-term decision.
Buying a home in 2023 will be an exciting journey for many Australians. Just be prepared to tackle some rocky roads in the next 12 months to ensure smooth sailing as we head into 2024 and beyond.
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