What happens to property prices from here? Ask these economists
So property portal Domain has some strong egg-head economists working for them, and they tend to be pretty good with their forecasts.
And what are they predicting for the next year or so.
Boom.
Pretty much.
I mean, we’re not going back to the crazy days of Covid, but strong price gains seem pretty baked in from here.
And Sydney is very quickly pushing back towards double-digit growth.
Sydney house prices are predicted to increase as much as 9 per cent by June next year, powered by strong demand from surging population growth and scarce listings, despite further interest rate rises expected this year, Domain says.
By the end of financial 2024, Sydney median house prices are expected to hit $1.66 million, which would eclipse the $1.59 million peak set in March 2022.
Australia’s housing market is also forecast to have moved towards a well-established, steady recovery over the financial year 2024 as interest rates stabilise or begin to decrease.
Under the hood, it’s simple supply and demand, as a record surge in population slams into a market already chronically under-supplied:
Population pressures combined with chronic undersupply would fuel price increases, even as interest rates were still expected to rise this year, said Nicola Powell, Domain’s chief of research and economics.
“Population pressures will drive housing demand and property prices higher, particularly with the momentum in lifting temporary and permanent visa grants to alleviate skills shortages,” Dr Powell said.
“This is occurring at a time the construction industry has experienced unprecedented headwinds – skills shortages, supply chain disruptions, and soaring construction costs.
”Higher construction costs have created an industry-wide slowdown and could eventually feed into higher property prices – with pre-existing housing undersupply worsened as a result.”
Around the country, Domain has all the capitals recovering their recent losses and pushing back to their previous peaks.
Adelaide, Perth and the combined capital cities are also forecast to reach record highs, while price increases in Brisbane and Melbourne will take them near peaks.
House prices in Adelaide are set to climb between 2 per cent and 5 per cent which means the median house price will increase to between $837,000 and $861,000.
Between now and the end of FY24, Adelaide’s median house price are poised to exceed $800,000 for the first time.
Prices in Perth are expected to rise between 1 per cent and 3 per cent, taking the median house price to a new high of $704,000 and $718,000, surpassing the $700,000 mark for the first time.
Brisbane house prices are predicted to rise between 1 per cent and 4 per cent, taking the median $3,000 to $27,000 lower than the record high of $858,511 reached in mid-2022.
Prices in Melbourne are poised to gain between 0 and 2 per cent, which means house prices will remain lower than the record high of $1.094 million achieved in December 2021.
Those numbers look broadly right to me… and may end up being a touch conservative if rate cuts come through quicker than expected, which could easily happen.
But the broad thrust is right. The market fundamentals are still heavily tilted towards shortage, and that will drive prices higher over the next couple of years.