The 2022-25 Australian Housing Outlook, commissioned by QBE, forecasts what will happen to Australia’s property market in the next three years.
- The slowdown in the housing market that Australia is currently experiencing will be widespread, but it will vary by state and territory. Sydney is the most vulnerable to rising borrowing rates and could see the biggest decline.
- The residential market will be affected by the tightening of credit availability. Reserve Bank of Australia said that there may be more cash rate increases until 2023.
- Due to the rising interest rates and due to expectations of tighter monetary policies, borrowers are opting for fixed-rate mortgages. A fall in borrowing capability could affect buyers’ ability to bid up property values.
- In the next six months, we could see the steepest drops in housing prices. The bottom of Australia’s property cycle is expected to be reached in late 2023. After the base has been reached, prices will rise as borrowing costs stabilize.
- The unit price has grown modestly over the past two years and is expected to decrease less than house prices. Unit prices are less vulnerable to affordability problems due to the recent price disparity.
- As the demand for larger homes has been boosted by working from home, the unit sector will benefit from the transition to hybrid work arrangements.
- Rent growth will continue to attract investors as the number of migrants returning from abroad is expected to increase.
Take a look at the future of each Australian capital over the next three years.
Sydney Property Market Forecast
- After its recent boom, NSW is now in a downward trend. Prices started to drop in April 2022. In June 2022, the median price of a house in Sydney was $1.531,000.
- Sydney is a city with a high household debt level, making it more susceptible to interest rate increases and tighter lending terms.
- The median house price is expected to decline by 18% compared to its peak.
- The state’s reform of stamp duties could support soft growth in 2023.
- In the quarter ending June 2025, it is anticipated that the median house price will reach $1405,000.
- Sydney’s rental markets recovered quickly from the drop in demand caused by the pandemic as soon as the borders were reopened. In 2022-23, unit rents may increase by 15%, while house rents might increase by 13%.
- Over the next two years, 2024-25, there is a greater expectation of rental growth in units than in houses. Rents that are growing strongly will drive investor demand.
- Regional NSW was buoyant because of affordability and the preference for working at home. In 2024-25, there will be an even distribution of the population growth, which will boost demand in places like Newcastle and Wollongong.
Melbourne Property Market Forecast
- The median house price in Melbourne was $1,060,000, down 2.2% from the previous quarter.
- In 2021-22, a weak demand led to an oversupply. The recent increases in interest rates will continue to affect prices as the surplus continues to grow.
- By 2025, the median house price may be $995,000.
- Inner Melbourne is experiencing a tightening of rental vacancy rates. By December 2022, unit rents should recover from the losses incurred during the pandemic. Victoria’s population will grow by 1.5% in 2022-23 as international students and borders reopen.
- The ‘Big House Build’ of the state and investment in build-to-rent will lead to an increase in housing construction.
- Melbourne’s median price unit is expected to reach its lowest point in 2023 and then rise to approximately $647,00 by June 2025.
- The preference for working from home will allow regions such as Geelong and Bendigo to grow at the same rate as capital cities.
Brisbane’s Property Market Forecast
- Brisbane had the best performance in the country for 2021. Its median prices rose 32% in a year, while the national average was only 22%.
- The rapid growth in the housing market was caused by an influx of migration from southern states during the last two years.
- Brisbane, with its median house price at $864,000, was more affordable than Sydney or Melbourne in June 2022.
- Brisbane will outperform the other cities in the next three-year period due to its strong population growth and affordability, as well as the demand for housing relative to the number of dwellings.
- Tightened credit conditions will reduce borrowing capacity and affect affordability.
- Brisbane’s home price in 2024-25 may be $819,00 in June 2025.
- Queensland unit prices have outperformed the national average, rising by around 13% between 2021-22 compared to 3%. In June 2022, the median unit price was $550,000.
- In response to the strong rental growth in Queensland, investors returned in 2022. This led to an increase of four times in investor lending within two years.
- The migration of young families tightened the rental market in Brisbane and changes in household compositions. Brisbane’s rental vacancy rate was 0.97% in June 2022. This is the lowest since March 1988.
- Unit rents will grow another 19% in the next three-year period, up to June 2025.
- After a slight trough at the end of 2023, it is expected that the median unit price will be $570,000 in June 2025.
Perth Property Market Forecast
- Perth’s median home price is estimated to have risen 10% between 2021-22 to $665,000.
- The reopening of domestic and international borders supported Perth’s real estate market rebound, increased housing affordability, an active mining sector, a strong employment market, and available stock.
- In June 2025, a 4% increase in the price of houses in 2024-25 would bring it to $679,000.
- The return of net overseas migration to Western Australia is expected to contribute to population growth. The large temporary population of the mining industry in Perth is the main driver for rental demand and unit market growth.
- Perth has been reclassified in 2019 as a regional destination for immigration purposes. This could lead to an increase in student migration.
- Perth’s median price of a unit is forecast to rise 3% to $436,000 by 2021-22. The market will also avoid the downward trend for dwelling prices in the coming year.
- The completion of new Metro links and social infrastructure could boost Perth CBD’s growth.
- In June 2025, the median price is expected to reach $459,000.
Adelaide Property Market Forecast
- Adelaide’s prices have risen over the past two years due to a combination of factors, including low housing supply, uncharacteristic migration from interstate, and affordability.
- In June 2022, the median house price surpassed $700,000. It reached $718,000 – 42% more than it was in June 2020.
- The positives of Adelaide’s housing markets might not disappear in the next three-year period. The demand boost from net migration to other states will diminish over time. The new housing supply will rise as construction projects are completed.
- The median house price is now past its peak in Adelaide and may drop 6% within the next three years to $676,000.
- Adelaide’s unit prices grew by 11% between 2021-22 and the median price in June 2022 was $462,000
- Investors are encouraged by the acceleration in the growth of rents. They increased 9% in 2021-22 for units.
- Rents will rise by approximately 17% in the next three years, up to June 2025. The median price will be $468,000. Unit prices are expected to remain stable.
Hobart Property Market Forecast
- In the past two years, house prices have been boosted by a persistent and tight dwelling deficit and a housing stimulus.
- Prices are expected to peak at $811,00 in the quarter ending June 2022.
- Hobart’s median house price increased 19% between 2021-22, despite the slowdown in the market. Hobart is predicted to be Australia’s third-most unaffordable city.
- This market is particularly sensitive to changes in interest rates due to the stretched affordability of housing, but a lack of supply can counteract that. Forecasts predict that the median house price will fall around 8% between 2022 and 2023 to $760,000 in June 2025.
- Hobart’s rental prices have already seen a significant increase owing to the tightening of rental vacancies. The median unit price has risen 11% over the last year to $651,00 in June 2022.
- The unit price is expected to drop to around $610,000 by late 2023 before increasing to $636,000 by June 2025.
Canberra Property Market Forecast
- Canberra’s median house price will surpass $1 million in March 2022. It is the third most expensive capital in Australia.
- The pace of house price growth slowed down, but a 14% increase was recorded between 2021 and 2022, taking the median house to $1,019,000 by June 2022.
- Canberra’s average household income is much higher than anywhere else in Australia, so affordability isn’t a major concern. The cash rate increase will still affect borrowing power and affordability, as well as drag down property prices.
- New dwelling supply will equalize stock availability in the next three-year period. In the next 18 months, median house prices will fall by 9% before increasing to $96,000 in June 2025.
- Canberra’s unit market has experienced solid growth due to rising incomes, a lack of housing, and declining listings. The median unit price in 2022 was $606,000.
- In 2025, the median price of a unit will be $627,000 because of strong migration from overseas and new construction that is geared toward apartments.
Darwin Property Market Forecast
- Darwin’s median home price increased 30% between 2020 and 21. It then rose another 5% from 2021 to 2022, reaching $627,000 by June 2022.
- Darwin is still one of Australia’s cheapest capital cities despite the recent strong recovery.
- Major investments in defense and resources could encourage a population influx in Darwin. Barossa LNG could boost demand during construction, and non-residential developments could create more job opportunities.
- Price drops could be limited in the coming three years. In the next two to three years, it is anticipated that the median house price will increase to $647,000.
- Darwin unit prices are expected to remain stable as the employment outlook improves, tourism returns and the oversupply of housing diminishes. Investors are attracted by a high gross rental yield (6%).
- Darwin’s unit price increases are expected to exceed house prices. By June 2025, the median unit price should increase to $412,000.
Making Green Property Choices
- Australia is the country with the highest percentage of homes that use rooftop solar power. By June 2022, there will be nearly 3.2 million installations or about 30% of homes. A 5kW rooftop system can save an average Australian $909 per year on electricity.
- Solar systems can add value to your property and increase its value. Renters who have solar panels on their roofs pay an average of $19 extra per week.
- To reduce future emissions, new homes can be built with better insulation, double-glazed Windows, and lighter-colored roofs. At the Building Ministers’ meeting, the transition to greener housing was accelerated. A minimum 7-star rating for the Nationwide House Energy Rating Scheme – NatHERS – was mandated.
- A property’s value could be increased by sustainable housing. Energy-efficient homes could be worth between 5-10% higher than homes of similar size and quality.
- Energy-efficient heating, lighting, and appliances are becoming more popular in the home.
- Environmentally-conscious customers can find renewable energy and carbon offset products at Energy retailers.
- To encourage the development of sustainable housing, lenders have begun to offer home loans. Personal loans are available at reduced rates for retrofitting green appliances, adding rooftop solar systems, and making other green upgrades.
