Estate house prices report: Sydney Melbourne prices tipped to rise
House prices are expected to rise in the coming year, despite aggressive rate hikes due to high immigration.
Real estate market group Domain forecasts a six to nine per cent rise in house prices in Sydney between now and June 2024 and a two to five per cent rise in unit values.
House prices in Melbourne would rise by zero to two percent, while values in Brisbane would rise by one to four percent.
Even the smaller capitals were tipped to see an increase, with house prices in Adelaide expected to rise by two to five percent, while prices in Perth rose by one to three percent.
House prices in Hobart were predicted to rise by three to five percent, while apartment values would rise by one to three percent.
House prices in Canberra are expected to rise by two to four percent.
The predictions are being made even though the Reserve Bank has already hiked rates 12 times since May 2022, marking the most aggressive hikes since 1989.
Economists from Westpac, NAB and ANZ expect two more increases in July and August that would take cash rates to a 12-year high of 4.6 percent – up from an 11-year high of 4.1 percent today.
House prices are expected to rise in the coming year despite aggressive interest rate hikes due to immigration (pictured is an auction in Sydney)
Dr. Nicola Powell, Domain’s head of research and economics, said high immigration would spur a house price recovery even if interest rates continued to rise.
“Public pressures over the next 12 months will lead to higher factors driving up housing demand and house prices,” she said.
Australia has seen an exponential increase in temporary and permanent migration since the international border reopened in late 2021 to address skills shortages.
“Of course, unlike natural population growth, those who come from abroad are not already housed.
“This puts us in a position where nearly 130,000 additional homes will be needed in the next fiscal year alone, with the East Coast receiving the largest share of migrants.”
Australia’s population grew 1.9 percent last year, with a net migration increase of 387,000, including the permanent influx of skilled migrants and the long-term cohort of international students.
Only Canada with a growth rate of 2.7 percent and Singapore with a growth rate of 3.4 percent are embarking on a faster rate of population growth among the rich countries.
The Treasury Department expects a record 400,000 migrants to move to Australia this financial year, resulting in most cities having very tight vacancy rates.
Sydney’s median house price fell 9.2 percent to $1.294 million in the year to May, data from CoreLogic showed.
It had peaked at $1.417 million in April 2022 before the Reserve Bank began raising rates in May 2022 for the first time since November 2010.
Dr. Powell said housing prices in Sydney would rise again within a year.
“Sydney’s recovery will be slow but steady after a sharp downturn in 2022,” she said.
“At the end of next financial year, house prices will be at a new record level.”
Dr. Nicola Powell, Domain’s head of research and economics, said high immigration would spur a house price recovery (pictured is a rental row in Sydney)
Reserve Bank of Australia governor Philip Lowe told a Senate economics committee hearing last month that housing supply has not kept pace with population growth
The median home price in Brisbane is down 11.1 percent to $792,125, but Dr. Powell expects it to reach an all-time high in June next year.
Reserve Bank of Australia Governor Philip Lowe told a hearing before the Senate Economics Committee last month that housing supply has not kept pace with population growth.
The population will grow by 2 percent this year. Are there two percent more homes? No, said Dr. Lowe.
‘The rate of addition to the housing stock is very slow.
‘A lot of people are coming into the country, people who want to live alone, that doesn’t work.
“The way this unfortunately resolves itself is through higher house prices and higher rents.”
Dr. Powell said that while a construction company collapse would hurt the supply of new homes, higher interest rates would dampen property price increases.
“Combining this with unprecedented headwinds in the construction industry and unusually weak listings has contributed to a forecast of continued tight housing supply driving up competition in the market,” she said.
“While prices are expected to rise, affordability will keep the pace of growth in check as rapidly rising interest rates and ongoing mortgage servicing challenges persist in a complex and dynamic market.”