Sydney property prices could soar 9%

• The forecast for Sydney sits between 6% and 9%
• National capital cities to see growth of 2% to 4%, units 1% to 3%
• Government immigration push to drive property prices in the next year

Sydney homeowners could be the big winners in the next financial year, with values tipped to surge by up to 9%, according to a new report.

Domain Forecast Report Financial Year 2023-24, predicts that Sydney houses will perform best, while houses in Adelaide will also grow by up to 5% along with houses in Hobart.

Nationally, the combined capital cities will see growth of between 2% to 4%, while units will rise by between 1% to 3%.

While all housing markets are expected to increase, unit values could potentially fall in Melbourne and Canberra.

Domain’s Chief of Research and Economics, Dr Nicola Powell, said population growth will be the key driver of property prices in the next 12 months.

“Australia has seen an exponential increase in temporary and permanent migration since the international border reopened in late 2021 to alleviate skills shortages,” said Dr Powell.

“Of course, unlike natural population growth, those arriving from overseas aren’t already housed.

“This puts us in a position where in the next financial year alone, nearly 130,000 extra dwellings will be needed, with the Eastern Seaboard receiving the largest share of migrants.”

“When you combine this with unprecedented headwinds in the construction industry and unseasonably weak listings, this has contributed to a forecast of continued tight housing supply that drives up market competition.

“While prices are expected to rise, affordability will contain the pace of growth, as the likes of rapidly rising interest rates and ongoing mortgage serviceability challenges continue to play out in a complex and dynamic market.”

Powell said Australia’s housing market will be in a well-established steady recovery over the next financial year. The centre of positive price gains will be the combined capitals led by house prices in Sydney, Adelaide and Hobart, with a slower pace of growth across combined regional house and unit prices.

House and unit price forecast to the end of FY24

Source: Domain.

Sydney surge

Dr Powell said Sydney house prices could be at a new record high by the end of the next financial year if the forecast growth of 6% to 9% eventuates.

“The recovery will be steady in comparison, taking roughly six quarters of growth to recoup the three quarters of price declines.”

For Melbourne, house prices will remain relatively stable over the next financial year if the forecast growth of 0% to 2% occurs.

“Even at the upper forecast of 2%, it will recoup about one-third of the value lost during the downturn, making it the slowest recovery in the past 30 years.”

“The recovery from the deepest downturn of 2018-19 (when house prices fell 9.9% from peak to trough) spanned four consecutive quarters to recoup a loss one-third greater than 2022-23.”

Brisbane close to highs

Brisbane house prices will be very close to a new record high by the end of FY24 if the forecast growth of 1% to 4% eventuates, Dr Powell said.

“The 2022 downturn saw house prices fall 6.1% from peak to trough over three consecutive quarters (from the mid-22 peak to March 2023).”

“The recovery will be steady in comparison, taking at least six quarters of growth from the March 2023 price trough to recoup the three quarters of price declines.”

Dr Powell said Adelaide house prices will be at a new record high by the end of FY24 if the forecast growth of 2% to 5% comes to fruition.

“Between now and the end of FY24, Adelaide’s median house price will surpass $800,000 for the first time.

“The city avoided a price downturn during 2022 and early 2023, as acutely seen in the more expensive capital cities such as Sydney, Canberra and Brisbane.

“If our forecast holds, Adelaide could avoid any material downturn in house prices and instead have a period of subdued growth compared to the boom time of the previous few years.”

Dr Nicola Powell, Domain’s Chief of Research and Economics

Perth to remain stable

Perth house prices will be at a new record high at the end of the next financial year if the forecast growth of 1% to 3% occurs she said.

“Perth has seen more stability than other capital city markets as affordability and positive migration patterns support demand.

“Perth managed to avoid a downturn during 2022 and early 2023, as acutely seen in the more expensive capital cities such as Sydney, Canberra and Brisbane.

“Based on our forecasts for FY24, Perth could avoid any material downturn in house prices, instead moving into a period of subdued growth compared to the previous few years.”

Canberra to recover

Powell said Canberra house prices will move into recovery over the next financial year if the forecast growth of 2% to 4% happens.

“Canberra will retain its million-dollar title, with the median not predicted to slip below seven digits.

“The 2022-23 downturn was the steepest Canberra had ever experienced – short and sharp – with house prices falling 10.9% from the peak to March 2023.

“It is almost certain the June 2023 quarter will also see prices fall, to reach a trough.”

She said Hobart house prices will be in a well-established recovery over the next financial year if the forecast growth of 3% to 5% eventuates.

“The recovery is forecasted to be slow and steady, taking more than five quarters of growth to recoup the value lost.”