In 2025, the housing market is expected to start picking up again, with home prices rising by approximately 1% to 2% above the current inflation rate. This increase will be due to a combination of factors such as the rise in real incomes, lower mortgage rates, and increased affordability.
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.
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.
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.
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.
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.
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.
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.
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.
The problem is naive investors believe this myth and buy any old property and think its value will double in a decade – I guess that's why so many investors fail. But as with any good myth, there is always partial truth. Note: So the truth is… some properties do double in value every 7 to 10 years, but many don't!
Big bank predictions on the up for housing prices
New house price forecasting from big four bank ANZ suggests prices will increase by 10% in 2023, up from its previous forecast of 6%.
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.
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.
“If the pace of price growth recorded over the past quarter continues, national property prices will surpass their prior peak by January 2024.” It comes after the Reserve Bank hiked rates to an 11-year high, with a warning there could be more hikes on the way.
QBE's data indicates that the median house price in the Gold Coast is expected to rise from $680,000 in 2021 to around $806,000 by June 2024, representing a total three-year growth of 18%. This increase is due to a combination of remote working and very low interest rates as well as ongoing interstate migration.
Why are Australian houses so expensive? Australian house prices have been steadily rising year on year as a growing population lifts demand for housing while supply has not kept up with the requirement. A decline in interest rates over the last two decades has also boosted the number of buyers in the market.
CoreLogic data shows house prices dropped by 9 per cent across the combined capital cities in the early 1980s recession, with Sydney plummeting by 25 per cent. During the early 1990s recession, national home prices fell by 6 per cent and Sydney was down by 10 per cent.
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.
The Australian property market has been a topic of much speculation and concern in recent years. Between 2020 and 2021, the market witnessed a significant upswing, with prices skyrocketing in the wake of the COVID-19 pandemic.
However, he believes rising unemployment, further rate rises (with the cash rate now widely expected to top 4 per cent) and the roll-off of 880,000 fixed-rate mortgages onto more expensive variable rates will trigger another leg down for property prices.
Despite interest rates continuing to rise, house prices are expected spike further in 2023 and 2024, according to the National Australia Bank.
If you're in the market for a new home, you may want to time your purchase to certain months on the calendar. Research has found that would-be buyers pay a greater premium—that is a price more above market value—in spring and summer months. The best time to buy a house? Fall and early winter.
“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.
Mortgage Bankers Association (MBA) vice president and deputy chief economist Joel Kan. Kan expects mortgage rates to average 5.6% by the end of 2023.