We are now well into the New Year and many are wondering what the property market will look like for us in 2023. Will there be more rate increases and will mortgage holders finally start to see some relief?
Refinancing at an all-time high –
It’s no surprise that borrowers refinanced a record $19.5 billion (yes you read right!) of home loans in just November last year alone! Refinancing activity is at ultra-high levels right now, as owners-occupiers and investors alike try to find home loans with lower interest rates as the Reserve Bank continues to raise the cash rate. Just to put that into comparison, that was 20.4% higher than the year before and 88.2% higher than two years before in 2020.
The Reserve Bank has hinted at a few more rate rises, saying they want to return inflation to 2-3% target range (it’s currently 7.3%) and would “do what is necessary to achieve that outcome” – i.e. further increase the cash rate. If you haven’t looked at your home loan for a while, it might be a great time for you to look at refinancing and have a chat to the team at The Finance Co. Group.
Growth in residential construction costs expected to slow this year –
As home building costs continue to rise sharply, it appears the worst is behind us. This is good news for people renovating or completing a new build.
Residential construction costs rose 11.9% during 2022, after climbing 7.3% in 2021, according to CoreLogic’s Cordell Construction Cost Index (CCCI).
The 2022 result was the largest annual increase on record, apart from the period impacted by the introduction of the GST.
However, the pace of growth appears to be slowing: prices increased 4.7% in the September quarter, but only 1.9% in the December quarter. It is predicted that costs would be unlikely to rise at the same rapid pace as in the recent past, because rising interest rates and inflation have made consumers, builders and suppliers more cautious.
RBA expects inflation to fall in 2023 –
While inflation continues to be worryingly high, it may have peaked. The Australian Bureau of Statistics’ latest data show that inflation rose from 6.9% in October to 7.3% in November. In early December, the Reserve Bank of Australia (RBA) forecast that inflation would “peak at around 8%” in December. If that’s the case, inflation may already be cooling.
Inflation is expected to decline in 2023 “due to the ongoing resolution of global supply-side problems, recent declines in some commodity prices and slower growth in demand”, according to the RBA, before falling further in 2024, to “a little above 3%”. The RBA has said that high inflation “damages our economy and makes life more difficult for people”, so it’s determined “to re-establish low inflation and return inflation to the 2-3% range over time”.
We are taking the above information as a positive and hoping that as the year progresses that the extremely high cost of living we are experiencing at the moment, gradually decreases and we can all finally feel some relief.
The Team at The Finance Co. Group are always available to chat with regarding your home loan and finances.
