Orens Capital Investors Report 2023
An uncertain calendar year ahead – for the economy and property. A significant decline in sales in FY2023 will be similar to what occurred over FY 2019.
Are there any turning points in the market? The main remarks are as follows:
Can increased personal/household savings through the pandemic and anticipated improved wage growth offset the continuation of precautionary behaviour as high inflation leads to elevated cost of living pressures and additional interest rate rise further reducing borrowing capacity.
How will rising housing construction costs impact purchaser demand for lot types.
Will the structural shift in buyer preferences towards detached housing remain and continue to pull purchaser demand into the growth areas.
The re-start of overseas migration–a key driver of new home demand–will be a positive for growth areas, however, how long after arriving in Australia will they be comfortable to become owner occupiers.
Will developers moderate land releases to give housing construction time to work through the substantial pipeline of building activity to reduce and alleviate any settlement risk that may emerge.
Population Forecast
Victoria – Net Overseas Migration
With borders opening up, an inflow of 55,631 people is estimated this financial year.
Victoria – Net Interstate Migration Will improve but remain below average.
Average Annual Population Growth 2023-2026 Victoria remains Australia’s fastest-growing city over the next four years.
Lot Sales Activity
A significant decline in sales in FY2023 will be similar to what occurred over FY 2019. Gross Sales of the 2023 FY is expected to see a decline in sales by approximately 50%, however this is still an improved position on what was deemed a positive 2020 financial year post the 2018 /2019 downturn. Melbourne house price will decline by 5% and the lot price will drop 2%.
This is based off:
- Migration: Rebounded strongly over the first half of 2022 but impact of new house demand will lag.
- Demand Pull Forward: Challenging market conditions exacerbating vacuum in local new home demand.
- Moderation of Supply: Developers moderating to bring title time frames down.
- Finance: Significant rate rises in 2022 & 2023 reducing borrowing capacity.