Off the back of interest rate rises, unseasonal wet weather, and post-pandemic supply chain shortages, 2022’s property market slowdown was well documented. But what’s in store for 2023? Is there more volatility on the horizon, or will smoother market conditions finally favor the first home buyer again? We take a look at some of the economic indicators to watch for this year.

Interest rates only tell one part of the story

The eight rate rises in 2022 may not have been a great story for borrowers but was undoubtedly beneficial to savers. If you’ve been diligently saving a deposit, then you’re earning interest in those savings for the first time in a long time.

At 3.1% headline rate, the bigger story is that interest rates are still very affordable, a fact that’s often missed in all the news coverage. The ability to fix a rate for several years when you are approved for mortgage finance is a great way to insulate against future rises, and it pays to shop different lenders to find out who can give you the better deal.

One of the other big headline economic indicators that should give first homebuyers confidence is the unemployment rate. Right now, Australia has the lowest unemployment rate since 1974. This means that most people that want a job have a job. And that labour shortages mean that job stability is high because it costs too much for employers to lose good people. So, if you’re in a stable and well-paying job, lenders are likely to see you as a good candidate for finance.

The booming rental market

With borders open again, international students returning, and immigration back up to pre-pandemic levels, the demand for rental homes and apartments is booming. So much so that vacancy rates (unrented stock as a percentage of total rental stock) are so tight that some desperate renters are bidding to get a roof over their heads.

The only way to alleviate scarcity in the rental market is to bring more housing stock online, but in a year in which construction in almost every capital city has been affected by extended periods of wet weather, this is going to take some time.

For first homebuyers, the rising cost of renting is a big motivator to stop paying off someone else’s home and start paying off their own. As inflation comes under control and rate rises slow this year, paying off a mortgage could start to look more affordable than paying rent. In the towns and suburbs where this is the case, expect to see first homebuyers enter the market and get their foot well and truly on the property ladder.

Higher savings, increased borrowing power

As mentioned earlier, savers are finally starting to see interest earnings in their bank accounts. This is good news if you’re saving for a home deposit. To further boost your savings and accelerate your goal, there are a few tips you should know that can make you a good candidate for a home loan, in the eyes of lenders.

The first is reduce the number of credit cards you have and reduce the credit limit on the cards you keep. According to Effie Zahos from Money Magazine, for every $10k you reduce in line of credit, you could lift your borrowing capacity by $55k.

The second is reduce your living expenses and discretionary spending. This might mean cutting back on eating out or dropping a streaming subscription or two to save more at the end of every month.

Finally, keep your credit score healthy by paying your bills on time. It all adds up to help you get that loan approval when the time is right.

Is 2023 your year?

No one can answer this question but you. It takes a lot of saving and sacrifice to get yourself into position, but if you’re doing the work now, you’re in a great position to jump when you find the property that you’ve been dreaming about. And don’t forget to check whether you’re eligible for first homebuyer grants and concessions—they’re a great way to get a helping hand on one of the most important decisions of your life.