Property News, Insights & Education

    Australia's housing market - Record price highs with more to come

    • Property group Domain’s latest report says combined capital city home prices reached a new national high at the end of 2023
    • Domain is forecasting home prices will continue to increase in 2024, albeit at a slower pace
    • Another forecaster, Oxford Economics Australia, is predicting muted home price growth in 2024, before prices accelerate in 2025 and 2026

    Australia’s housing market has recovered from the downturn that saw prices slide backwards in 2022, with two forecasters predicting new price records in 2024 and medium to strong growth in home values over the next three years.


    Property group Domain’s newly released report for the December quarter of last year shows combined capital house and unit prices ended 2023 at a new national record.


    With a potential interest rate cut expected later this year, Domain is predicting new price peaks in 2024.


    Domain’s numbers


    Domain’s data shows that prices grew in most capital cities in 2023, with Adelaide leading the charge in median house price growth.


    House values in the South Australia (SA) capital increased an astonishing 12.7% in 2023, followed closely by Perth (11.9%) and Sydney (10.6%).


    At the other end of the spectrum, median house prices in Canberra, Hobart, and Darwin decreased by 4.6%, 2.5%, and 1.2%, respectively.


    House prices in Sydney ($1,595,310), Brisbane ($888,285), Adelaide ($875,034) and Perth ($742,390) all ended 2023 at record highs, while unit prices in Canberra ($625,597), Brisbane ($524,202) and Adelaide ($484,407) are also at all-time highs.


    Domain is predicting that the large Melbourne property market will complete its recovery during 2024.


    change in house prices


    “While stretched affordability, cost of living pressures and high interest rates were expected to put a lid on property prices in 2023, the undersupply of new homes, cost-to-build blowouts, a growing population and a tight rental market continued to boost housing demand,” says Nicola Powell, Domain's Chief of Research and Economics.


    “This led to new record prices for combined capital houses and units by the end of 2023, which broke the previous records that we saw in March 2022 for houses and December 2021 for units.”


    median price


    The outlook


    Domain is forecasting that national price growth will continue this year, albeit slower.


    “What the latest data is telling us is that the prices are still rising, but the pace of growth is slower than what it was in the early stage of the recovery,” Dr Powell says.


    “This pace is driven by new stock coming into the market, easing the competition, but not enough to halt price growth.”


    “With an interest rate cut tipped to happen in the latter half of the year, we are expecting to see an increasing demand that will likely drive upward price pressures on the housing market.”


    Nicola Powell also points to the impact of the scheduled Stage 3 tax cuts from 1st July, saying they “may alleviate some of the cost-of-living pressures” at the same time that “inflation is easing, which may help improve mortgage affordability.”    


    The view from Oxford


    Domain’s data and observations make an interesting comparison with new property forecasts from Oxford Economics Australia.


    The consultancy is predicting national home prices will rise just 2.7% in 2024, before ramping up markedly to an average of 6.3% annual growth in both 2025 and 2026.


    Oxford’s predictions also show a clear divergence between growth in Australia’s major cities and different rates of growth between house and unit prices.


    For example, in Sydney, house prices are forecast to rise by a modest 3.3% in 2023-24, while units will jump by 5.2%.


    According to Oxford, the Perth market will stand out for growth, with the median house price forecast to grow by more than 10% in 2023-24, and 9.8% in 2024-25.


    “Capital city performances have diverged in recent months,” says Maree Kilroy, the Senior Economist at Oxford Economics Australia.


    “Total listings have risen in Melbourne and Sydney, a trend we expect will continue in coming quarters, acting to slow price growth.”


    But on the other hand, she says “tailwinds will serve to propel prices in Perth, Brisbane, and Adelaide” with “low levels of advertised listings and affordability in pockets” propping up prices.


    And like Domain’s Dr Nicola Powell, Maree Kilroy believes “interest rate cuts from late 2024 should boost credit availability, accelerating broad price growth once again.” 


    prop price growth


    Renters and investors


    For those renting or thinking of investing in residential property, Oxford believes some of the extraordinary rental growth we’ve seen in the past two years - 14.3% in 2023 alone - will start to moderate. 


    It forecasts national rental prices for houses to grow by 4.1% in 2024 and 5.8% for units.


    The exception will be Perth.


    “The Perth rental market is expected to outperform over the forecast horizon, driven by nation-leading population growth and a relative affordability advantage”, says Maree Kilroy.


    Both houses and unit rents in the WA capital are forecast to rise by more than 9.7% per annum over the next three years.


    Elsewhere, Oxford predicts rental growth will slow to an average of 2.6% in 2025 and 2026 – a rate that the forecasting firm points out is similar to normal consumer inflation.