Australians flocked to the regions during the pandemic, as lockdown restrictions and remote working arrangements drove demand for larger homes in lifestyle locations - often by the beach.

But the capital cities are now coming back to life - workers are returning to the office, international students are returning, and overseas migration is back on the agenda. 

As Morningstar editorial manager Sarah Dowling explains, asking rents for inner-city properties are expected to be driven higher in 2023 as supply fails to keep up with demand. 

Transcript: 

Sarah Dowling: So, the housing market enters 2023 in a very different position than it was a year ago. We know that rising interest rates are going to continue to put pressure on property prices, but the real story for 2023 will be on the outlook for the rental market.

PropTrack's Director of Economic Research Cameron Kusher expects rents will continue to rise, particularly in the larger capital cities. Over the past year, asking rents on realestate.com.au have already risen by 10%. We know that vacancy rates are at historic lows and supply just isn't keeping up with demand. That's only expected to get worse, because we've got international students returning, we've got overseas migration, and they don't tend to buy when they first move here. And then, of course, as people return to the office, more people are moving back into the cities. So, there are some opportunities there for people looking for increased yields on their rental properties.

Of course, there is no one property market. There are thousands of suburbs across Australia, each offering different growth opportunities and income potential. But in 2023, the story will really be all about those inner-city rental markets. Pressures on the inner-city rents are expected to be extremely strong heading into 2023.