Unsurprisingly, almost 7 out of 10 Australians (65 per cent of the general population) believe that 2023 is the wrong time to enter the property market, agreeing with the statement “Because of rising interest rates and falling house prices, people should be cautious about entering the property market for the time being ...
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.
Despite interest rates continuing to rise, house prices are expected spike further in 2023 and 2024, according to the National Australia Bank.
“We tend to weather recessions better than the rest of the world, and we have strong employment and growth, as well as a rising population and a shortage of homes. So, we see good opportunities for investors in 2023.”
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"We will see prices continue to fall in 2023 but it is unlikely they will erase all the growth achieved during the pandemic upswing. That was a once in a generation boom.
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.
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.
Sydney's ailing housing market will bounce back next year with price growth that will lead the country, new economic modelling has revealed. SQM Research's annual Housing Boom and Bust report released Tuesday showed Sydney prices were primed for growth over 2023 due to an increase in underlying demand for housing.
Melbourne and Hobart are braced for falls of 10 per cent, while Adelaide, Darwin and Perth will see a marginally softer single-digit drop, the report said. The flipside is, even with potential falls of up to 10 per cent, national property prices will still be more than 18 per cent above pre-pandemic levels.
Prices could fall further
If you buy in a recession, there is always the risk that prices could fall even further. That said, Australian property prices usually tend to rise in the long run, especially in capital cities. So if you're prepared to spend some time owning your property, you're likely to come out ahead.
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.
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.
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 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.
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.
Australia's housing sector is burdened by some of the highest debt levels in the world, with a household debt-to-income ratio of 211%, more than double the 101% in the US and far higher than the UK's 148% and Japan's 115%.
The outlook for property markets
Mousina expects markets to be flat to slightly up on the year. Given we've seen some gains this year, this means there will some further downside in the second half of 2023. “The RBA is likely to take rates higher than people were expecting.
Declines were far more widespread in Sydney and Melbourne, where house values fell in 98.7 per cent and 97.8 per cent of suburbs respectively over the year, CoreLogic's Mapping the Market Report shows. Unit values dropped in more than 95 per cent of Sydney suburbs, and about 84 per cent of Melbourne suburbs.
House prices in the national capital are set to grow between 2 per cent and 4 per cent, according to the Domain forecast. Despite this, the median price will still be lower than the $1.17 million peak of June 2022 after the largest peak-to-trough fall of all the capital cities.
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.
However, there are also predictions that Brisbane's property prices could experience a decline of 12% in 2023, following a modest rise of 1% in 2022. According to the PropTrack Property Market Outlook February 2023 Report, the expected median house price in 2023 is $719,669, with the median unit price not specified.
The supply- demand balance peaks in 2021 with an excess of over 42,000 dwellings in Melbourne and an excess of almost 37,000 dwellings in Sydney. Beyond 2023, demand is projected to modestly exceed supply as the construction industry begins to respond to the uptick in demand.
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 number of residential dwellings in Australia rose by 52,000 to 11,020,300, and the mean price of residential dwellings rose by $8,500 to $896,000, this quarter. The mean price of residential dwellings in NSW ($1,150,400) remains the highest in the country, followed by the ACT ($951,800) and Victoria ($898,300).
Recent data from banking experts suggests that the Perth housing market is set to remain stable in 2023. NAB's previous prediction of a -13.1 per cent drop in house prices in 2023 has been revised to a modest 0.1 per cent gain, indicating that Perth home prices are unlikely to drop in the next two years.