With interest rates rising and property prices falling, it's becoming harder to access housing finance, but analysts say some suburbs still have bright prospects next year.
A panel of property analysts has compiled a list of 100 suburbs around Australia which they say have the best prospects of defying negative real estate trends in 2023.
They've identified the suburbs by considering a range of mid- and long-term drivers of growth, such as affordability, location, gentrification, amenities, and demographic change.
Victorian suburbs are the most prevalent on the list, accounting for 29 spots of the 100.
New South Wales and Queensland both account for 24 spots, followed by South Australia (9), Western Australia (7), the ACT (5), Tasmania (1), and the Northern Territory (1).
It comes as the latest ANZ-Property Council survey shows sentiment in the property industry has now fallen below pre-pandemic levels, as the Reserve Bank keeps lifting rates aggressively.
Which suburbs made the list?
The list of properties has been compiled by Realestate.com.au and released this week for its inaugural "Hot 100" publication.
The list will be published every year to track changes in Australia's property markets as demographics and economic conditions evolve.
Its list of 100 suburbs for 2023 is in the table below.
You can toggle through the pages by pushing the arrow buttons at the top right corner of the interactive table.
You'll notice different criteria for each suburb.
The analysts say those criteria are the growth drivers for each suburb that helped the suburbs get onto the list.
Cameron Kusher, director of economic research at PropTrack and one of the analysts for the project, said the Reserve Bank's rapid rate hikes had contributed to a lot of market uncertainty this year but they were also creating opportunities.
"Despite the rapid increases in rates through 2022 and subsequently reduced borrowing capacities and lower home prices, there are still plenty of suburbs that offer great opportunities," he said.
"That's why it's imperative that anyone thinking of buying does their own research to understand what drives a local market and how it is likely to evolve over the coming years."
Each suburb has unique drivers of growth
If you click through to this link you'll see how Realestate.com.au has presented the information.
It includes details about every single suburb on its list.
Its website explains the criteria that drive mid- and long-term demand, and the terminology it uses in its analysis.
It also tells you who was on the expert panel that chose the 100 suburbs.
PropTrack economist Anne Flaherty said when examining the list of suburbs a number of trends for 2023 became evident.
"Many suburbs were selected based on their affordability, which is a key concern of some buyers currently active in the market," Ms Flaherty said.
"Livability was another key driver of selection, with references to amenity, infrastructure, and family appeal. Since the onset of COVID, people place higher importance on lifestyle.
"And opportunities for future growth were also important, with many of the experts choosing stand-out suburbs based on their solid investment prospects, a growing population, or undergoing gentrification."
Property industry sentiment is slipping as rates keep rising
Meanwhile, the latest ANZ-Property Council survey shows sentiment in the property industry keeps declining as interest rates keep rising.
The December quarter survey was taken between 14 and 30 November, a week before the RBA lifted its cash rate target again.
The RBA has lifted the target from 0.1 per cent to 3.1 per cent since May, and it's willing to keep going.
But the survey shows sentiment has fallen in both the residential and commercial property sectors in the December quarter.
ANZ senior economist Felicity Emmett said sharply rising costs and fixed-price contracts were creating financial pressures in the building industry.
She said while there was some evidence that cost pressures were easing, more than 30 per cent of survey respondents said they expected costs to increase by between 5 per cent and 10 per cent in the coming year.
"Interest rates are set to continue to climb through the first half of 2023 in our view," she said.
"As rates rise, both residential and commercial property prices will come under more pressure.
"Housing construction will eventually turn down, as easing capacity constraints enable builders to work through the large pipeline of activity, and interest rates begin to bite.
"But non-residential approvals remain close to a peak, and the expected strength in construction will provide an offset to weakness elsewhere in the economy in 2023," she said.
According to the survey, residential property sentiment declined across all indicators as higher interest rates start to impact the outlook.
However, the forward work schedule is still high, given a very large backlog of work built up largely as a result of labour and product constraints, but also because of wet weather.
Measures of work yet-to-be-done are running at record highs.
See the graph below.
"Firms remain more upbeat about their own prospects than the broader outlook, but their optimism is fading," Ms Emmett said.
"Sentiment around hiring intentions and the work schedule outlook remain elevated but are trending lower.
"If firms scale back employment plans sharply, their more negative outlook for the economy may come to fruition," she said.
