Property prices surge in Australia signalling good news for wealthy homeowners and disaster for renters
According to a major bank, home prices will continue to soar for the rest of the year — but while property owners may be smiling, renters already struggling with the cost of living will struggle to keep a roof over their heads.
NAB has increased its short-term forecast for the capitals to an eight per cent increase in house prices, up from the previous forecast of 4.7 per cent.
Although the bank predicts that price increases will slow to five percent by 2024, this still represents a whopping 13 percent growth in what property buyers will have to digest in just two years.
Meanwhile, a shortage of accommodation caused by strong migration and problems in the construction sector will see rental prices continue to rise relentlessly. One suburb expects a staggering $300 per week rent increase by the end of the year.
NAB chief economist Alan Oster said strong demand, driven by high migration and construction sector woes, would keep home sellers happy and largely offset the dampening effect of interest rate rises earlier this year and into 2022.
Auctioneer Karen Harvey is selling a property in Sydney, where prices are rising sharply
“For 2024, we expect prices to rise by around five percent, with population growth, rental growth and the labor market still supportive, offset by some pressure from the continued flow of higher interest rates,” Mr Oster said.
Mr Oster also predicted that another rate hike was on the way after the Reserve Bank had a cooling-off period, leaving rates at 4.1 percent since June.
“On interest rates, we continue to see the RBA raising the cash rate to 4.35 per cent at the November meeting, before holding until the second half of 2024,” Mr Oster said.
“From there, we think the RBA can start to return policy to a neutral level of around three per cent, with growth below trend and the unemployment rate rising to around five per cent by the end of 2024.”
If rates do indeed rise in November, it would mark the thirteenth increase since May 2022, adding to the stress of borrowers who have already endured a 63 percent increase in monthly mortgage payments in just over a year.
Despite high mortgage repayments, NAB predicts some capital cities will see house prices rise for the rest of the year, such as Perth, which will rise 12 per cent before a sharp decline to 1 per cent in 2024.
Brisbane is also seeing an increase of about 12 percent or more this year, but that should decrease to 6.5 percent by 2024.
For those looking to get into the capital’s property market, little reprieve in prices is forecast for the rest of this year (stock image)
Adelaide homes are expected to rise in value by 8.6 per cent for the rest of 2023, slowing to a 6.2 per cent increase next year.
PropTrack senior economist Eleanor Creagh told realestate.com that a lack of choice drove up prices in the smaller capitals.
However, Ms Creagh said another smaller capital, Hobart, did not perform as strongly as prices rose 6.6 per cent from the March 2022 peak.
“However, this comes after several years of outperformance and strong growth during the pandemic. House prices in Hobart are still up 38.4 per cent since March 2020, Ms Creagh said.
NAB predicts prices in Hobart will fall 3.3 per cent this year and be flat by 2024. This means there is at least some hope for first home buyers looking to get their foot on the property ladder.
Values in Sydney are expected to rise 11.6 per cent in 2023, before slowing to 5 per cent in 2024.
Melbourne is just the capital where price increases are expected to accelerate from 4.7 percent to 5.5 percent next year.
The housing shortage remains bad news for tenants. Models released by Suburbtrends in August show that many renters could face increases of more than $100 per week next year.
NAB chief economist Alan Osters said the lack of supply would push house prices sharply higher in the near future
In Dee Why, on Sydney’s northern beaches, rents are forecast to rise by as much as $300 a week, with increases of more than $200 also expected for other popular areas in the city.
Queensland renters living in Surfers Paradise, Broadbeach and Isle of Capri could pay an additional $170 per week by 2024.
Houses and units in the Victorian capital’s Port Melbourne, South Melbourne and Southbank suburbs are seeing the strongest increases in that state, with average rents expected to rise by $165.
In hundreds of other Australian suburbs, rents are expected to rise by less than $50 a week.