Kilroy says that while there is no doubt the property market was in a downturn over the latter half of 2022, a crash is unlikely due to strong economic fundamentals. The first of these is demand, with high rents and the return of overseas migration resulting in more potential buyers.
Of the majority who believed the property bubble is close to bursting, 62% expected it to happen in the next five years, 21% within the next year, and 17% in the next 10 years or more.
However, in the short term, a significant surge in house prices is unlikely. As interest rates remain restrictive and unemployment rates might increase in 2023, the positive impact of demand and supply issues will be limited. Nationwide prices are expected to rise by approximately 2 per cent by the end of 2023.
Australian property values experienced a downturn in 2022 and prices continue to fall—but predictions of the overall peak-to-trough price decline tend to vary between 15-25%. Read more about whether the Australian property market is going to crash.
So investors may assume that should the average 5.1% per year price increase continue going forward for the next 7 years, median house prices could rise to as much as nearly $1.2 million by 2030 and units to just under $750,000.
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%.
au's analysis showed that, even if prices rose at a similar rate to inflation over the next five years, the median house price would still be near $1.5m in 2027.
Published 16 Apr, 2023
Australia is heading towards a severe housing crisis, with a projected shortage of 106,000 homes by 2027. This dire situation arises from high-interest rates, surging immigration, and community resistance to new developments.
Finding a place to live is harder now than at any time in at least two decades, with just 1.1 per cent of the nation's stock of rental properties available for lease. The country's rental market is clearly out of balance, says Brendan Coates, the Grattan Institute's economic policy program director.
House prices in Australia are extremely high compared to income, relative to other countries. The market is propped up by rules that provide tax deductions for property investment, and by repeated state government bonuses for first home buyers. Furthermore, the supply of new homes is hard to generate.
“Prices now expected to lift 5 per cent in 2024, revised up from 2 per cent.” Overall, Westpac has predicted house prices will soar by 5 per cent in both Sydney and Melbourne, prices will jump by 6 per cent in Brisbane and rise by 8 per cent in Perth in 2024.
According to a report by Zillow, home values are projected to increase by 5.5% over the next year, slower than the 16.9% increase seen in 2021. Zillow predicts that home values will increase by 3.5% in 2023, 3.4% in 2024, 3.3% in 2025, and 3.2% in 2026.
Supply of existing properties is on the rise
If you've been thinking about investing in rental property, then now could be the time to do it. Tenants currently have their pick of various homes, but it's unlikely that the market will stay stagnant for long.
Prices across the country are set to slide by up to 10 per cent by the end of 2023, with Sydney, Brisbane and Canberra to be worst affected by the downturn.
A big chunk of our society is very vulnerable indeed. In summary, we continue to expect house prices to decline in 2023 with total peak-to-trough losses in the order of 15 per cent-25 per cent, as we outlined in October 2021.
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.
Largely, renting is much less financially stressful than buying. Saving for the deposit on a first home can take a lot of time and sacrifice as opposed to upfront rental costs, which usually only include a couple weeks of rent in advance and a bond. After that, renters only have to pay for the rent and utilities.
One problem contributing to the crisis is soaring rental prices. Thanks to rising interest rates and the cost of living, landlords have had to increase rents to keep on top of mortgage repayments, which doesn't help those trying to find an affordable place to rent.
While there's no consensus on what rents will do exactly in 2023 — go up a little, go down a little, or stay flat, according to three forecasts — what's clear is they are expected to return to more normal growth patterns, instead of the unsustainable, record rates seen in 2021 and 2022.
The Boom in House Prices. Between 1995 and 2005, real house prices in Australia increased by more than 6 per cent per year, with an average annual increase of almost 15 per cent from 2001 to 2003.
Rent inflation for apartments with new tenants was 24 per cent over the year to February 2023, whereas the overall index increased by 14 per cent. By contrast, rent inflation for houses and townhouses with new tenants was around 10 per cent over the year to February 2023.
In Australia, the average life of a brick home is 88 years and a timber home is 58 years (Snow and Prasad 2011). Many homes last much longer than this. Decisions that are made about homes today will continue to have consequences for many decades.
Therefore, the median price is expected to be $1,405,000 in the June 2025 quarter, with this figure representing an overall decline of some 8% from the June 2022 level.
Research shows the best month to sell a house in Australia is March, while the best season for sales overall are the Autumn months. Other strong months for sales include over Spring, with November and October the next best months to sell a house.