Property market predictions and Canberra suburbs to watch in 2023

Andrew Chamberlain, managing director of Blackshaw Real Estate, said he expected strong buyer demand in the year ahead.

"In 2022 the market caught its breath a bit, which it needed to do," he said.

"The demand on rentals is still very high, the demand for property is still very high."

Mr Chamberlain predicted next year will be a "normal" market, with a slight increase in property values.

"I'm expecting [values] will be maybe a few percentage points higher than at the end of 2022," he said.

Whilst he's not predicting any great movement in values, Mr Chamberlain foresees more records will be broken.

"I'm not expecting anything major to happen other than Canberra's first $10 million sale," he said.

"So I am predicting that we will crack the eight figures in 2023."

Canberra's house price record was broken in 2022 when a Deakin property sold for $9 million.

In the entry-level segment of the market, there'll be strong demand for apartments, John McGrath, founder and CEO of real estate agency McGrath said.

Canberra's apartment market had benefited from a shortage of supply, he said, which drove the median unit value up 18.3 per cent to $629,531 over the 2022 financial year.

Canberra's apartment median has since dropped to $600,628.

In 2023, first home buyers will be up against strong investor demand for Canberra units, Mr McGrath said.

"The challenge for first home buyers is to navigate the fierce competition for a low supply of smaller one- and two-bedroom apartments," he said.

Reserve Bank of Australia governor Philip Lowe said in December the board "expects to increase interest rates further over the period ahead".

Monetary policy will continue to shape housing market trends in 2023, CoreLogic's end-of-year report stated.

A peak in inflation and interest rates could see "a bottoming out in price falls", but further increases could see the pace of price declines re-accelerate.

The end of record-low fixed rate terms in 2023 could also test housing market conditions, the report stated.

Mr Chamberlain said higher interest rates would moderate any chance of frenzied buying.

"I'm expecting that as some of those fixed interest loans rollover into higher [interest rates] during 2023, that will temper enthusiasm for some buyers," he said.

"There won't be the frenzies that we saw maybe 18 months ago."

Mr Chamberlain stopped short of predicting whether it would be a buyer's or seller's market.

"It'll be a civilised place where I think buyers and sellers will have an equal footing in the negotiations next year," he said.

Mr McGrath said he was confident Canberra's housing market could ride out any further challenges.

"Three years of consistent growth has led to Canberra decoupling from the smaller capital cities to join Sydney and Melbourne as Australia's most valuable property markets," he said.

This makes the territory "exceptionally well placed" to weather economic challenges that may be ahead in 2023, Mr McGrath said.

"With significant new wealth amongst homeowners, and locals earning Australia's highest average incomes, Canberrans are well equipped financially to cope with rising inflation and interest rates," he said.

Price declines have been more prominent in the top end of the property market, according to the Hotspotting price predictor index, a tool based on trends in sales volumes.

"Generally, the upper end of the market is struggling in Canberra," the report stated.

"Of the 24 suburbs with median house prices above $1.2 million, only one (Watson, $1,205,000) is classified as a rising market."

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The Belconnen and Gungahlin districts held up well during the recent downturn, the report stated, due to their relative affordability.

Casey was noted as a stand-out suburb for investors with median prices of $805,000 for houses and $565,000 for units, Hotspotting data showed.

"Palmerston in the Gungahlin district (median prices $980,000 and $630,000) stands out for its consistency of sales activity quarter by quarter, as does Macgregor (median house price $790,000) in the Belconnen district," the report stated.

Hannah Gill, director at The Property Collective and president of the Real Estate Institute of the ACT, said 2023 could be a better year for the those looking to get into the rental market.

"Over the last couple of years we've seen [Canberra's rental] vacancy continue to remain ridiculously low, under 1 per cent, and as a result rents have continued to climb," she said.

Ms Gill said the vacancy rate had recently crept over 1 per cent and expected it to increase slightly in 2023.

"Even with that softening of vacancy, I think we'll still find quite a competitive landscape but probably after the January rush, that heat and urgency we won't see as much in the market."

Construction prices skyrocketed during the pandemic but Ray White chief economist Nerida Consibee said things would likely improve in 2023.

"Construction costs are now the biggest component of inflation, having risen by over 20 per cent over the last 12 months," she said.

"Interest rate rises however are slowing down demand for renovating and building new homes.

"Similarly, many of the problems that have plagued the industry such as blocked supply chains and labour shortages are now being resolved.

"Building costs are unlikely to drop considerably however it is likely that it will be easier to find a builder in 2023 and cost escalations will slow."

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