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Australia's Property Boom & Bust Report 2023 📈 Louis Christopher, SQM Research

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News and Commentary

Overview

Australia’s Property Boom & Bust Report 2023 (with SQM Research, by Louis Christopher) examines how uncertain real-estate forecasting is, and argues that 2023 outcomes largely depend on Reserve Bank of Australia (RBA) policy, particularly where the cash rate peaks.

Main arguments / forecasts

  • Forecast uncertainty is high: Real estate forecasting is “extremely challenging” because it depends on factors that are unpredictable and situational, with the RBA viewed as the key driver.
  • Core 2023 expectation (base case): On the balance of probabilities, SQM expects a modest-to-moderate housing recovery across Australia’s capital cities, with:
    • Sydney leading the recovery
    • Perth showing relatively strong growth
  • Recovery depends on the cash-rate ceiling:
    • SQM’s central threshold is that the cash rate must not rise above ~4% for a meaningful recovery.
    • If the cash rate goes above 4%, SQM expects more forced selling and a worse housing outcome.

RBA controversy and framing

  • The discussion references RBA messaging that previously suggested no interest-rate rises until 2024, which SQM and the host characterize as a reputational misstep (“a lot of egg on their face”).
  • SQM proposes scenario-based forecasting, tied to:
    • What the RBA does next
    • How inflation evolves

Four key scenarios presented

SQM narrows the outlook to “top four” scenarios and selects a base case:

  1. Rates on hold (base case) The RBA pauses, and recovery can occur.

  2. “Goldilocks” (best-case-ish) Potential rate cuts in the second half of 2023.

  3. “False door” scenario (major risk) The RBA pauses, but inflation re-accelerates (SQM uses an extreme example of CPI reaching ~10%). The RBA then reacts by aggressively lifting rates again, causing a hard landing late 2023 into 2024.

  4. Rates continue rising (worst-case) The RBA doesn’t pause and continues tightening until housing faces a steep recession later in 2023, leading to a greater housing correction.

Why Sydney is viewed as stronger

SQM points to several Sydney-supporting factors alongside the macro cash-rate threshold:

  • State tax changes in NSW A shift allows first-time buyers to opt from stamp duty to land tax, which SQM argues could stimulate demand (e.g., more renters becoming first-time buyers).

  • Rising underlying demand Borders reopening and net overseas arrivals, flowing especially to Sydney and Melbourne, support demand for housing/accommodation.

  • Rental pressure The rental market is described as still tight (Sydney vacancy around ~1.3% nationally ~1%), with rent growth/market rent increases contributing to inflation concerns and supporting investor interest.

  • Auction market signals Auction clearance rates in Sydney trend upward, including mid-60s in Eastern suburbs (interpreted as a sign the Sydney economy remains strong).

    • However, auction volumes are down versus the prior year, indicating a more cautious selling environment for agents.

Inflation expectations

  • SQM argues inflation is unlikely to return quickly to the RBA’s 2–3% target. Even if it peaks and eases, it may remain “somewhat elevated.”
  • They treat jawboning (talking conditions down to weaken confidence) as part of the process, while emphasizing that on-the-ground indicators do not suggest an immediate economic collapse.

Risk for existing homeowners with fixed loans expiring in 2023

  • SQM discusses concerns that fixed-rate borrowers will face payment resets (e.g., from ~2% to ~5–6%).
  • They argue media coverage may be overstated, based on feedback from loan-book managers:
    • Many borrowers were serviceability-tested at higher rates (often variable rate +3%), meaning lending already accounted for stress conditions.
    • Reset risk still increases if cash rates exceed 4%, potentially driving more distress selling.
  • Indicator used: distressed listings activity
    • Up to about 6,000 nationally (roughly 1,000 more than a few months earlier)
    • Still well below pre-COVID levels (about 13,000 average in that earlier period)
    • Overall view: rising, but not yet explosive.

Purchase and positioning of the report

  • The report is marketed as going beyond capital-city averages to postcode-level analysis, including:
    • Median prices
    • Rental vacancy
    • Rents
  • Mentioned one-off purchase price: $59.95
  • Website referenced: sqmresearch.com

Contributors / agents discussion and closing remarks

  • The host frames the advice as: be a trusted advisor and use expert forecasts to guide clients.
  • Louis reiterates that market timing depends on:
    • The cash-rate path
    • Inflation dynamics
  • He emphasizes scenario 3 (“false door”) as particularly concerning if the RBA misreads a renewed inflation breakout.

Presenters / contributors

  • Tom — host/interviewer
  • Louis Christopher — owner, SQM Research
  • Susan — mentioned as assisting with on-screen links/questions (no formal speaking segment captured beyond brief references)

Original video