In Sydney, one of the world's most overvalued property markets, prices are down 13 per cent from their peak while sales fell 28 per cent last year compared with a 17 per cent decline nationwide, according to CoreLogic data.
A new report ranks global property markets as fair valued, overvalued or in bubble risk territory. Sydney property prices are overvalued despite recent price falls, the report found. Experts warn prices will not necessarily fall back to levels that would be fair value.
Prices across the country are set to slide by up to 10 per cent by the end of 2023, with Sydney, Brisbane and Canberra to be worst affected by the downturn.
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.
Therefore, the median price is expected to be $1,405,000 in the June 2025 quarter, with this figure representing an overall decline of some 8% from the June 2022 level.
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.
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.
au's analysis showed that, even if prices rose at a similar rate to inflation over the next five years, the median house price would still be near $1.5m in 2027.
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%.
By the end of 2024, Sydney, Melbourne, Canberra and Hobart are forecast to rise by 2 per cent, Brisbane by 5 per cent, Perth by 4 per cent and Darwin by 3 per cent. Nationwide, house prices are set to increase by 3 per cent, but Adelaide is expected to drop by 1 per cent.
Supply and demand imbalance
One of the primary reasons for high house prices in Australia is the imbalance between supply and demand. Housing supply is under ongoing strain due to an increasing population and a limited land supply, particularly in large cities like Melbourne and Sydney.
The largest unit discount was in the Ryde region at 7.7 per cent, up from 5.1 per cent. Westpac senior economist Matthew Hassan said the high levels of discounting correlated with some of the largest price declines.
The largest unit price falls were in Little Bay and Woolloomooloo, down 24.6 per cent and 20.4 per cent, then Eastwood, Paddington, Mona Vale and Newport.
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.
Australian property values experienced a downturn in 2022 and prices continue to fall—but predictions of the overall peak-to-trough price decline tend to vary between 15-25%. Read more about whether the Australian property market is going to crash.
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.
Sydney's mid-point house price stood at $1,221,367 at the end of 2022 and Westpac is expecting prices in 2023 to grow by one per cent, which would take levels up to $1,233,581, based on CoreLogic data. A five per cent increase in 2024 would take prices up to $1,295,260.
House prices are expected to soften further in 2023 but falls may not be as severe as some expect if the RBA stops increasing rates before the cash rate reaches 4%.
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“As a result, the average house price in Sydney will also surge from $1.2 million in 2023 to $7.3 million by 2050.
If prices were to continue to grow as they have been, by 2027, the median house price in Sydney would top $2 million – it currently sits at $1.34 million – and hit almost $1.4 million in Melbourne – it's currently $900,000 there.
It'll probably come as no surprise, but the best time of year to buy property in Australia is just before or just after winter. As people hibernate during the colder months, fewer properties are listed for sale. There is also a significantly reduced number of buyers.
In Australia, the average life of a brick home is 88 years and a timber home is 58 years (Snow and Prasad 2011). Many homes last much longer than this. Decisions that are made about homes today will continue to have consequences for many decades.
By 2041 we will have 13 million homes, up from 10 million in 2021.
New homes in 2050 will be highly energy-efficient – featuring several ways of capturing, storing, and distributing energy. Due to climate change, homes will need to be more responsive to weather events. In addition, better cooling systems will ensure homes don't overheat in the potentially warmer summers.