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Hear the latest weekly insights into the property market via podcast by Rich Harvey, CEO and founder of Propertybuyer.

 
Sun 23 Jun '24 with Rich Harvey Why Tax Depreciation Matters
 
 
Fri 14 Jun '24 with Rich Harvey Tax Effective Property Investment Strategies
 
 
Fri 24 May '24 with Rich Harvey Granny Flats: Boost Your Yields & Faster Mortgage Repayments
 
 
Fri 3 May '24 with Rich Harvey Unpacking the Northern Beaches with Incredible Agents
 
 
Fri 29 Mar '24 with Rich Harvey How to build a $7 Million Property Portfolio from scratch
 
 
Sat 16 Mar '24 with Rich Harvey Why Invest in Melbourne?
 

 

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Property Price Forecasts FY 2025

July 1, 2024 / Written by Rich Harvey

 

By Rich Harvey, CEO & Founder, propertybuyer

Written by: Rich Harvey, CEO & Founder

propertybuyer.com.au

July 2024 Market Update

 

Despite higher interest rates hanging around for longer, property prices continue to rise across the country at differing rates. A massive housing undersupply problem is building momentum and will underpin property price growth over the next decade. This month we compare the latest property price forecasts by the big four banks to reports from two other economic experts, then I examine the positive and negative pressures driving the current market.  

If you think property prices are high now- think again - you haven’t seen anything yet. Albert Einstein was famously quoted as saying “Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn't, pays it." Buying a well-located property for fair market value today will pay huge dividends if you can ride out the property cycles. Compound capital growth has been a proven strategy for property investors and the bedrock of wealth for many families buying their own home. Recall that I analysed 25 years of data in a previous update which estimated where property prices would be in 20 years’ time (spoiler alert – Sydney median house price will be over $5.0m and Melbourne $3.5m). 

Another quote I like to use is “Lotto is for those that don’t understand maths.” Trying to get rich quick is a recipe for disappointment and frustration. Buying a property when interest rates are higher takes courage. A smart strategy is to buy a property when others are fence sitting and when there is negative economic news all around.  

Over the next 12 months some significant changes will take place in the property market. I can’t predict with 100% certainty what will happen, but I can tell you from decades of experience, that I have never seen such rapid immigration and population growth leading to structural undersupply so quickly. This chronic under-supply situation will be here for many years and is creating conditions ripe for the next property boom.  

Once interest rate cuts come, either late this year or early 2025, the market will re-ignite and instead of 3 people at an auction – there might be 10 or more bidding for the same property. Buying during the winter of economic uncertainty and buying BEFORE the market turns up again is a smart play.  


Header- Property Price Forecasts2

Property Price Forecasts FY2025

ANZ bank recently updated their property forecasts suggesting capital city house prices will rise between 6% and 7% in 2024, 5% to 6% in 2025, and around another 5% in 2026.  

 

ANZ house price growth forecasts-2

 

Westpac house price growth forecasts-1

 

 

Westpac senior economist, Matthew Hassan, is suggesting slow price growth for Sydney and Melbourne due to affordability constraints compared to sharper rises in Perth, Brisbane and Adelaide driven by short supply and more affordable pricing. 

 

CBA house price growth forecasts-1

 

NAB house price growth forecasts-1

 

Dr Nicola Powell, Domain's Chief of Research and Economics, is an excellent commentator and forecaster on the property market and recently released Domain’s House and Unit Price Forecast for 2025. Domain’s forecast indicates that we will see new record median prices in Sydney, Brisbane, Perth and Adelaide by the end of FY25.

 

Domain_ House Price forecast to the end of FY25.-1

 

Domain Unit Price Forecasts by the end of FY25-1

 

Sydney’s median house price will exceed $1.7m with an estimated growth rate circa 7% - which is on par with its historical long-term average.  

Melbourne prices look set to remain stable over the next year with median house prices just over $1m. Dr Powell points out the current Melbourne downturn has been the slowest and most inconsistent recovery in the city’s history.  The long-term value proposition of Melbourne is looking strong for savvy investors.  

Brisbane is set to reach the $1m median price by the end of FY25. Brisbane prices continue to be fuelled by ongoing interstate migration (largest of any state), attractive lifestyle and pro-development councils.  

Adelaide might also crack the $1m median house price barrier if current projections hold strong. In a similar vein to Brisbane buyers are attracted to easier lifestyle, affordable housing – but the test will be sustained jobs growth and wages.  

Perth prices have hit stratospheric growth levels over the past year and look set to come back to more normalised growth levels. Severe supply shortages, ultra-low vacancy rates and rapid investor demand are helping drive this market.  

Looking back over time, bank economist forecasts are typically conservative and underestimate the actual extent of property price increases. Notice that Dr Powell’s forecasts are a few percentage points higher than the banks.  

Another independent economic research house Oxford Economics recently updated their property forecasts for the next 3 years as follows:  
 

Oxford Economics Price Forecasts to 2027-1

 

While some property investors reading this article will be critically evaluating each prediction and trying to pick the winning location for their next investment, the reality is that all markets will go through cycles of ups and downs. The smart investor does not place all their investments in one location – they rather look to capture the best growth of each location and consider markets that are currently sluggish to ride the next upturn.  

What factors are currently driving the market? Dr Powell from Domain has identified three upward pressures and three downward pressures.  


Header- Positive Price pressures2

Positive Price Pressures

  • Population Growth – Massive migration intake, rise of more single person households and demographic changes have contributed to very high demand for housing. While migration cuts are mooted, the reality is that we desperately need more skilled workers to fill bulging job vacancies.  

  • Rising Construction Costs – Home building and building approvals have not kept pace with population growth. Labour and material input costs rose significantly, and overall construction costs are still rising but at slower rate. Property prices need to rise to make development projects stack up.  

  • Tax cuts to assist borrowing power – Stage 3 tax cuts may provide more cash stimulus to households to be able to borrow.
      

Header- Negative Price pressures2

Negative Price Pressures

  • Wage Stagnation – with cost of living rising faster than wages, real wages are falling, making it harder to save for a deposit when house prices rose 36% and unit prices 10% since March 2020.  

  • Rising unemployment – could pose a significant risk. Unemployment reached a low of 3.5% in 2022 and is currently sitting at 4% in May 2024. This could dampen housing demand from those unable to qualify for housing loans.  

  • Consumer Sentiment – Negative consumer sentiment means people are putting off home buying decisions which can dampen housing demand for fear of financial stress or getting into a mortgage they can’t service. 

    This analysis shows a consistent theme across all capital city market that property prices are not going backwards – expect to pay at least 20% more for housing in 3 years’ time.  

    If you are considering buying your next property, please reach out to my friendly team of buyers advocates for an obligation free chat today. Click here to send your enquiry or call 1300 655 615. We’d be delighted to help you on your property journey.   

Call us on 1300 655 615 or send us your Property Brief here.   

We’d be delighted to help.  

 

Click here to get in touch with the Propertybuyer team:

Send us your property brief

or call 1300 655 615

 

The Propertybuyer
Podcast

 
Sun 23 Jun '24
with Rich Harvey
Why Tax Depreciation Matters
 
 
Fri 14 Jun '24
with Rich Harvey
Tax Effective Property Investment Strategies
 
 
Fri 24 May '24
with Rich Harvey
Granny Flats: Boost Your Yields & Faster Mortgage Repayments
 
 
Fri 3 May '24
with Rich Harvey
Unpacking the Northern Beaches with Incredible Agents
 
 
Fri 29 Mar '24
with Rich Harvey
How to build a $7 Million Property Portfolio from scratch
 
 
Sat 16 Mar '24
with Rich Harvey
Why Invest in Melbourne?
 

 

Listen to many more
podcasts on our
Podcasts page.