"Property price falls are likely to continue and accelerate in 2023," report author Cameron Kusher said, blaming the cooling market on the rising cost of borrowing and its associated drain on household budgets. Australia's most expensive cities will likely see the largest price falls, he said.
If the price rises are maintained for the rest of the year, home values will end up about 4% higher in 2023, defying earlier predictions of sharp falls of 10% or more for this year, CoreLogic says. “Economists are shredding their previous price forecasts,” said Sally Tindall, research director for RateCity.
Despite interest rates continuing to rise, house prices are expected spike further in 2023 and 2024, according to the National Australia Bank.
Nationwide prices are expected to rise by approximately 2 per cent by the end of 2023. However, as the RBA potentially cuts interest rates before the end of 2023, demand pressures will contribute to a favourable environment for property prices.
Property Prices Could Potentially Surge in 2024
Evans and senior economist Matthew Hassan in a market update. "Prices are now expected to increase by 5% in 2024, revised up from 2%." Westpac predicts that by 2024, house prices will rise by 5% in both Sydney and Melbourne, 6% in Brisbane, and 8% in Perth.
The downturn in the global housing market is set to continue in 2023, with most Australian cities expected to fall by double digits in what is shaping up to be the deepest property correction in more than 30 years. Few people are willing to buy or sell in a falling market, and stock is hard to find.
Westpac has revised its house price forecasts, with dwelling values expected to stabilise in 2023 (initially forecast a -7% decline). National dwelling values are predicted to rise 5% in 2024, up from 2%. Increased migration, surging construction costs, and low market supply are contributing to the stabilisation.
The average annual growth rate for well-located capital city properties is about 7%, which means that Australia's median dwelling price should be around $1.1 million in 2030. But some properties will outperform others by 50-100% in terms of capital growth, so take these house price predictions with a big pinch of salt.
The data provided exclusively to The Sunday Telegraph showed the median house price would be $1.92m in 2027 and the median unit price would be $1.02m. Sydney prices would also be nearly triple those in Perth, Adelaide and Darwin if the current growth trajectory continued.
With borrowing costs continuing to rise and the subsequent reduction in borrowing capacities, property price falls are likely to continue and accelerate in 2023, Kusher said. “We're expecting prices to decline by up to 10% nationally in 2023, with greater falls expected in the larger capital cities,” he said.
However, rising interest rates will increase borrowing costs. The median house price increased by 14% to $1,019,000 in June 2022. In the next 18 months, a 9% fall in the median house price is expected with median house price predicted to rise to $996,000 by June 2025.
According to Domain figures, the value of Australia's housing market fell by -5% across capital cities in 2022. Sydney dropped by -10.9% and Melbourne was down -5.9%. While Canberra and Brisbane house values fell by -6% and -1.1% respectively last year. Most of the damage was done by the end of spring selling season.
“The unique set of circumstances we're seeing this year may present a prime opportunity for those looking to invest in the property market,” Mr Khursigara told Your Investment Property magazine. “Both Federal and State governments are buoyant with the estimates of new migrant arrivals in 2023.
Prices could fall further
If you buy in a recession, there is always the risk that prices could fall even further. That said, Australian property prices usually tend to rise in the long run, especially in capital cities. So if you're prepared to spend some time owning your property, you're likely to come out ahead.
Supply and demand imbalance
Housing supply is under ongoing strain due to an increasing population and a limited land supply, particularly in large cities like Melbourne and Sydney. This increased demand, combined with an inadequate supply response, drives up the average residential property prices.
Australia's housing sector is burdened by some of the highest debt levels in the world, with a household debt-to-income ratio of 211%, more than double the 101% in the US and far higher than the UK's 148% and Japan's 115%.
It's often said seven to 10 years is needed for property values to double, but new PropTrack analysis shows it took the median house price 15.4 years through to May 2023. It required even longer for units, around 17.8 years.
Home prices are still higher now than they were in 2020. There are also always new listings and buyer demand, no matter if we're in the boom or downturn phase of the property cycle. Plus, according to realestate.com.au, the average number of days on the market in December 2022 was just 42, which is very promising.
If you are looking at property sales, OpenAgent data generally indicates that the busiest times of year in Australia for buyers are the autumn months: specifically March and May. The most popular month for sellers to list their property for sale is November, just before the summer holidays.
The average lifespan of a new build house in Australia falls within a certain range based on industry standards and research. Generally speaking, you can expect a new build home to last for at least 50-60 years. Many homes will last even 100 years or more.
Newcastle, Wollongong and the south coast would also be home to an array of suburbs where the average dwelling price was over $2m, double what it is now, including Thirroul, Hamilton South, Caves Beach, Gerringong and Kiama. Wollongong will have $2m suburbs by 2028 if the current trajectory of prices continues.
The combined capital cities could see house prices rise 2 per cent to 4 per cent by the end of the 2024 financial year and units could climb by 1 per cent to 3 per cent, the Domain Forecast Report predicts.
In the three years to the end of 2021, median house prices surged by 43% in Sydney, Brisbane, and Canberra, 41% in Melbourne, and 62% in Hobart. The boom in house prices ended with the rate hikes in 2022. Even after price falls of 10% in 2022, nominal prices remain well above where they were before the boom began.
Sydney's ailing housing market will bounce back next year with price growth that will lead the country, new economic modelling has revealed. SQM Research's annual Housing Boom and Bust report released Tuesday showed Sydney prices were primed for growth over 2023 due to an increase in underlying demand for housing.
House prices in the national capital are set to grow between 2 per cent and 4 per cent, according to the Domain forecast. Despite this, the median price will still be lower than the $1.17 million peak of June 2022 after the largest peak-to-trough fall of all the capital cities.