What Properties Should You buy in Melbourne in 2023?

The Melbourne property in 2022 was an interesting one.

The first half of 2022 was a sellers market, where sellers have the upper hand in a sale. There are more buyers than properties for sale, and that, combined with the low mortgage interest rates pushed prices up 1-2% EVERY MONTH. That's right. Grade A properties in the good areas were rose between 10-12% areas. No one expected the RBA to lift interest rates so quickly and aggressively.

Official Cash Rates went from a low 0.1% to 3.1% by Dec 2022. And that caused mortgage rates to more than double, from approx 2.5% to approx 5.5%! This caused an almost instant shift in the property market. Market condition quickly changed from a seller's market to a buyer's market. Towards the end of 2022, vendors who had hold out hoping for a better price panicked. Some rushed their property to the market with realistic pricing and many more started to drop prices.

We had been anticipating a rise in interest rates for over a year, and had advised our clients to hold off buying, if there isn't any need to buy.

The Melbourne Property market outlook for 2023

If you are thinking of buying properties in 2023, in a cooling (falling) market, you should read this.

2023 is still expected to be a cooling market. At the very least, the first half of 2023 is not likely to offer anything different. Interest rates is still expected to rise. At a much slower pace though. Pain from the high interest is already being felt throughout the economy. People are cutting back from expenses, Businesses can no longer offer to keep staffs, and have started to reduce trading hours, or reduce staffing levels. Speaking to a few business owners, further cost cutting are planned for early next year. And that can include staff reduction.

So, the economy in the first half of 2023 is starting to look "cloudy" and uncertain. RBA will have no choice but to look into stopping the series of rate hikes, and potentially start to wind back interest rates by end of the year.

Depending on how back each individual property buyer is, interest is expected to pick up again.

What should you buy in 2023?

We wish there is a one-size fits all answer to this question. This will make our buyers advocates' life so much easier. And if there is all we need a single cookie cutter solution for everyone. Life isn't simple, and buying your home or investment property is at least 10 times more difficult.

Every property has a different goal, and every property is different, even if they are next to each other.

The best way to answer this question is: Look at what you need, to create a property portfolio that works for you?

First, the good news.

Good buys are already surfacing, and if you search hard enough, you will find one that is beneficial in your portfolio. but not many people know what to look for and not everyone has access to them.

2023 is the best time to buy anything you need to set yourself up for success. As a buyer, you should always be buying the right property that will set yourself up for success. Even if it is going to be your own Principal Place of Residence (PPR). Why? Because, you will need to sell your PPR one day. For that upgrade, downgrade, moving, migrating, kids inheritance, or simply attracting the buyers with good offers.

All property buyers should understand that the Melbourne property market is made up of multiple sub markets. While some markets are cooling, some are still on the rise.

When our buyers advocates review properties, especially investment grade properties, we categorise them into 3 distinct grades.

Grade A - those in blue chip areas, good location, tip-top, move in condition.

Grade B - those in lesser locations, and those that are generally in a move-in condition, but can do with some optionaly renovations.

Grade C - those in lower socio-economic areas, or need extensive renovations.

In the current Melbourne property market condition, while the prices of Grade B and Grade C properties might be falling, you might be expected to pay above asking price for the Grade A properties.

Choose an investment property that fits your investment plan and strategy.

Whichever you buy, there is definitely going to be lesser competition.

Next, the bad news.

How prepared are you? In times like this, most buyers prefer to sit back, have some popcorns and watch the consolidating property "shit-show". Most buyers became passive and are waiting for the right time (bottom) to buy. In other words, most are trying to time the market.

If you are hoping to wait for "the bottom" and buy at the bottom, you are one of the 95% of the property buying population. Don't see the problem? Afterall, what your mates do, will be right for you, eh? Good Luck. This is your bad news.

Why is this the bad news?

When the market turns, you will be wrestling with 95% of all other property buyers to buy the property you want. Remember Fear of Missing Out (FOMO)?

And, the next bad news?

So, you're still undecided. What could be the other bad news? Do you have answers for these? Do you know what you need to set yourself up for success? Here are some of the questions you need to answer:

1. what is your serviceability?

2. how much will a bank / lender lend you?

3. what should you buy?

4. where should you look for them?

5. how should you keep monitoring the marker for them?

How do you buy Properties in a Buyer's Market like 2023?

Buying in a falling (cooling) market is similar to buying in a booming market. Do your due diligence, find the types of properties you want, and buy. In a falling market, you might have more time to do your due diligence, so, you have less of an excuse not to do it properly. Good properties are still being sold fast, in a falling market though, so, do your due diligence with some urgency.

What should you watch out for when Buying Properties in 2023 (a Buyer's Market)?

As with buying properties during any other times, watch out for property spruikers. Especially those who claim and insist that off-the-plan apartments will give you the riches you need to retire early... They are just feeding themselves with the huge commissions from the developers. They are the ones who will be retiring early, while you are still paying off your depreciating apartments or trying to dispose them. This is not to say apartments are to be avoided. Apartments are the best for some buyers, and our blog on apartment buying will help explain this.

What strategies are best for buying in a Buyer's Market?

Buy when you can. Not timing the market. This is the strategy we've asked our successful investors to adopt. Again our strategy varies depending on what we buy. Again, we refer to our 3 property grades:

Go for the Grade As if you want something to live in, or to lease out for a premium.

Go for the Grade Bs if you want something you can improve, and potentially fetch a higher rent.

Go for the Grade Cs if you are a handy person, and you are prepared to get your hands dirty. Do note though, not all repairs or renovation works can be done by a handyman. Electrical works, gas and plumbing works, extension repairs, pergola repairs, etc will need the relevant council permits and has to be done by the relevant licenced contractors.

Grade A properties sell fast. And you might even meet with some strong buying competition. Be prepared to make your best offer for it. Our Best and Final Offer Guide will help you understand what you need to prepare for a best and final offer. While auctions are relatively rare in a buyers market, some real estate agents may still choose to sell the property through an auction, either through inexperience, or misguided information. In which case, check out our series of Auction Winning Guides. These are guides curated by our experienced buyers advocates, who each has over 20 years of property buying, selling and investing experience.

Grade B and Grade C properties are where you might be able to get a good bargain or discount. However, in a buyers market, most vendors would have lowered their expectations, and reduce their asking price accordingly. Do know how to determine the value of a property, if you are keen to make an offer.

Where can you get help to buy in a Buyer's Market?

As you would probably know by now. buying a property, especially in the competitive Melbourne market, is no longer as simple as finding one, putting an offer and expect a success. If you are not sure of where and how to buy in 2023, get in touch. Our buyers advocates are available to readily take over your buying headaches.

Lastly, Good Luck with your property journey. Wishing you a successful 2023.