Strong price growth in FY25, $1 mill houses the norm in Brisbane & Adelaide

With the end of the financial year in sight, property analyst Domain Group has turned its attention to the next 12 months.

Domain’s team has produced a set of bullish forecasts—with 17 out of the 28 markets it has assessed are predicted to set new price records, while the median house price in Brisbane and Adelaide is tipped to reach the $1 million mark by the end of 2024.

The details

Domain’s House and Unit Price Forecast for FY25 finds Australian home prices are forecast to rise again during 2024-25, although the firm says the pace of house price growth is expected to be slower compared to the 2023 calendar year and FY24.

Sydney’s median house price is tipped to pass $1.7 million, hitting a new record high after 6-8% price growth.

Growth in the Melbourne house market (0-2%) and Canberra (0-4%) will be more muted, while Brisbane (6-8%) and Adelaide (7-9%) will hit new record highs, with Domain’s team saying it would not be surprised if the median house price in those two cities passes the $1 million mark this calendar year.

Perth will continue its stellar growth, albeit at a slower pace of 8-10%, while Queensland’s Gold and Sunshine Coast house markets will chalk up solid growth of 3-6% and 2-5%, setting new price records along the way.

Domain says there will be a “marginal acceleration” in price growth for units in some markets.

Units in Sydney, Brisbane and Adelaide are all expected to see new price records set with growth of 4-6%.

Melbourne and Canberra will see lower price growth of 2-4% and 1-4%, respectively, while Perth will hit a new price record with 5-6% growth.

Putting things in perspective

Some of Domain’s predictions may seem relatively modest after the value gains of the previous year.

According to rival analysts CoreLogic, in the year to June 2024, house prices in booming Perth grew 22.2%, while units in the same city chalked up 21%, house values in Brisbane grew 16% and units 18%; Adelaide houses grew 14.3% and units put on 15.6% and even Australia’s most expensive property market—Sydney—managed 8.2% house value growth and 5.4% for units.

Nevertheless, Domain’s forecasts are quite astounding when you consider they come at a time of a severe cost of living crisis, a per capita recession, and a “higher for longer” interest rate environment.

As Domain points out, basic living costs are rising faster than wages—up 18% and 12%, respectively, since March 2020.

Interest rates (which hit 4.35% in November 2023) are at their highest point in 12 years, and it’s clear from the Reserve Bank of Australia’s latest statements on monetary policy that the cash rate is not going down any time soon.

"We predict that population growth, construction challenges, and borrowing power will be the key drivers behind the price growth,” says Domain’s Chief of Research and Economics, Dr Nicola Powell.

Dr Powell says demand for housing has risen because of “robust population growth,” demographic shifts and changes to housing composition.

“We have seen an increase in single-person households and a decrease in household size in general (fewer people, on average, living in each household), both amplifying housing demand, further compounded by migration.

“Home building has also struggled to keep up with population growth due to the scarcity of land, weak building approvals, and high construction costs, exacerbating the existing structural undersupply.

“This will lead to an ongoing limited supply of new homes on the market,” Dr Powell says.

As for increased borrowing power?

“As of 1 July, stage 3 tax cuts will mean more money hits Australian households, lifting borrowing capacity and, therefore, buying power across the country,” Domain’s Nicola Powell says.