In a report published last month, the International Monetary Fund noted that Australia's “housing cost overburden rate” – the share of the population spending more than 40 per cent of its income on housing – is higher than the average for advanced economies.
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.
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.
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.
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.
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%.
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.
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%.
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.
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.
The OECD's stark warning of a “rout” in house prices that ripples across the entire economy has raised the spectre of the crash of 1987.
Australia's current housing crisis is driven by the nation's unique demographics and a shortage of available residential land near jobs and services, with the impact of interest rates and government homebuyer subsidies often overstated.
High house prices in Australia are primarily driven by supply and demand imbalances, tax policies, low-interest rates, and rising household debt.
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.
Australia's 80 per cent recession risk
Research from the Reserve Bank estimates that Australia's risk of recession over this year and next could be as high as 80 per cent. But policymakers try to be more precise than that, so they use a specific definition of "recession" to say for sure if one has begun.
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.
By 2024, the bank is expecting house prices to gain 5 per cent in both Sydney and Melbourne, that prices should rise 6 per cent in Brisbane, by 8 per cent in Perth, and that there should be a 5 per cent gain nationwide.
In 2022, the median unit price was $606,000. By 2025, median unit prices will rise to $627,000 due to strong overseas migration and new construction geared towards apartments.
Australia has recorded its largest decline in property values on record, with values dropping by 7.9 per cent in a year and the median value of dwellings in more than 200 suburbs dipping below $1 million.
A big chunk of our society is very vulnerable indeed. In summary, we continue to expect house prices to decline in 2023 with total peak-to-trough losses in the order of 15 per cent-25 per cent, as we outlined in October 2021.
Australia's housing prices have experienced the largest decline in a calendar year since the global financial crisis (GFC) in 2008, when home values fell 6.4 per cent nationally.
Mr Young noted that the index also shows that average wages will jump by 425% over the next 28 years to 2050 which will drive up property prices by 486%. “As a result, the average house price in Sydney will also surge from $1.2 million in 2023 to $7.3 million by 2050.
Q6. What will mortgage rates be in 2024? In 2024, experts predict that the average rate of home loans will be 4.4 percent and will remain that way into 2025. Borrowers can expect lower rates by the end of 2023, with home loan interest expected to fall to 5.25 percent by the end of the year.
Selling Houses Australia is back for Season 15! Andrew, Wendy, and Dennis will transform some of the most testing homes that no one wants to buy into saleable properties with spectacular results.