Australian Property Market Soars: Predicted Growth Up to 5% in 2023 Amid Economic Pressures

Despite facing significant economic pressures such as interest rate hikes and increased living costs, the Australian home prices are forecast to rise by up to 5% this year, as reported by SBS News and RealEstate.com.au Property Reporter, Ben Dorrington in his article.

As per reports, the growth is likely to vary across different cities with Perth predicted to experience the most substantial increase of between 4% and 7%, followed by Sydney and Adelaide’s anticipated growth between 3% and 6%. On the contrary, Melbourne’s price growth is expected to be more moderate, with a potential increase of up to 2% or even a small dip by the end of the year.

A recent report by REA Group and Cameron Kusher, its author, predicts that Brisbane might see growth between 1% and 4% while the prices for Darwin and Hobart might fall or remain unchanged. The report attributes this predicted growth to a limited supply of properties for sale which has increased buyer competition and therefore, price growth.

“We saw price increases despite rising interest rates and reduced borrowing capacities and anticipate moderate price increases to continue over the coming months,” Kusher said as quoted by SBS News.

However, Kusher also mentioned that the outlook for 2024 remains uncertain, especially considering that a significant number of fixed-rate borrowers’ mortgages are set to expire from current interest rates of around 2% and reset to around 6%.

“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,” he further added, predicting modest price growth in 2024.

These forecasts are based on the Reserve Bank of Australia’s (RBA) series of interest rate rises nearing its peak, with the cash rate target currently remaining at 4.10% for the second month consecutively.

PropTrack’s Property Market Outlook Report and Kusher, the report’s author, also highlighted the possibility of interest rate cuts next year, which might result in increased borrowing and bid up prices. On the other hand, if the rates remain high and additional housing supply comes into the market, prices could potentially start to fall again.

“We’ve seen a rebound in property prices this year and we certainly weren’t expecting it – most people were expecting prices to continue to fall this year,” Mr Kusher said. “It’s a bit unclear what the specific drivers are, but one of the main drivers is the number of properties coming to market have remained very low through most of this year, although it has started to pick up over the past couple of months.”

Although the situation remains fluid and the factors contributing to the housing market’s development remain uncertain, Kusher believes that the unexpected rebound in property prices and continued strong migration to Australia will influence the property market’s growth trajectory this year.

However, the uncertainty around the supply of homes for sale, macroprudential policy changes, and interest rates make 2024’s forecast a more challenging task. With all these variables in play, only time will tell the exact course the Australian property market will follow in the upcoming years.

References:

SBS News, Australian home prices are set to keep rising this year, by up to 5 per cent https://www.sbs.com.au/news/article/home-prices-continue-to-rise-despite-pause-on-interest-rate-hikes/fnr98pd86 

Dorrington, B. Home prices set to rebound up to 5% this year https://www.realestate.com.au/news/home-prices-set-to-rebound-up-to-5-this-year/