- Home prices forecasted to rise by 2% to 5%, nationally, by December this year.
- Price growth driven by low volume of housing stock available for sale.
- Perth, Sydney, and Adelaide expected to have the highest growth.
Australian property prices are predicted to rise between 2% to 5% by the end of this year, according to REA Group‘s PropTrack Property Market Outlook August 2023.
The larger capital cities are expected to do the heavy lifting, while Hobart is forecast to see declines between 3% to 6%, and Darwin to see declines between 3% and 0%.
Housing shortage driving price upwards
Australian real estate prices grew by a record-breaking 34.9% between March 2020 to their latest peak in March 2022; after peaking, prices dipped by 1.9% between April 2022 and December 2022 before bouncing back.
The price rebound has been attributed to a bump in transaction volumes and the persistent stock shortfall.
Hence, despite the recent succession of interest rate hikes, with more expected to come, the report forecasts that prices will continue to rise steadily in the near future. Even though interest rate rises have lowered borrowing capacities, the low volume of housing stock is believed to be keeping a floor under prices.
The only regions where prices are currently at their peak are Adelaide, Perth, and regional Western Australia. On the other hand, the prices of Hobart, Canberra, and Melbourne, are the furthest from their peak.
By the end of this year, home prices are speculated to rise by around 2% to 5%. The report refrains from giving projections for 2024, due to various uncertain elements in the market.
“The outlook for 2024 is much less clear with a large cohort of fixed-rate borrowers’ mortgages set to expire from current interest rates of around 2% and reset to around 6%,” said PropTrack director of economic research and the report’s author, Cameron Kusher.
“Interest rate changes act with a lag, and as such, the possible impact of higher repayments on these borrowers won’t be seen until 2024. At this stage, we are forecasting modest price growth in 2024.”
Limited supply, high demand
“The property market has seen a turnaround this year with six consecutive months of property price growth. Limited supply of available properties for sale was a key factor contributing to buyer competition and price growth,” said Kusher.
“We expect property prices to increase by up to 5% nationally over the remainder of 2023, with greater growth projected in the larger capital cities,” he added.
Perth, Sydney, and Adelaide expected to be winners of 2023
A 3% to 6% price growth is expected for the combined capital cities. Perth is anticipated to have the strongest growth, around 4% to 7%.
Meanwhile, both Sydney and Adelaide are forecasted to have price increases of 3% to 6%, while Brisbane is expected to see 1% to 4% growth. Melbourne and Canberra are predicted to have price increases as well, albeit on a smaller scale of -1% to 2% and 0% to 3%, respectively.
Dwelling price forecasts for 2023 and 2024 calendar year
Meanwhile, Hobart and Darwin are the only capital cities expected to see declines in their prices, by 3% to 6% and 3% to 0% respectively. It is important to emphasise that the report’s projections assume that the cash rate is close to the peak of the rate hiking cycle.
