When property prices could peak again if pace of growth continues
New analysis of the Australian property market has revealed national home prices could return to positive annual growth as early as next month, if the current growth trajectory continues.
PropTrack’s latest Market Insight shows that if national home prices continue to grow at the same pace as they have during the past quarter, they could not only return to positive annual growth by July but could surpass their prior peak by January 2024.
“That could see home prices lift by 4% over 2023,” PropTrack senior economist Eleanor Creagh said.
“The housing market has so far avoided the steep falls many expected.
“After five months of price growth, stronger market conditions are becoming more widespread in 2023.”
Housing demand was stronger, likely bolstered by the surge in net overseas migration, as well as very tight rental markets, Ms Creagh said.
“Given limited new stock is coming to market, buyer interest is being concentrated, which is underpinning home prices and offsetting the downward pressure from interest rate rises,” she said.
However, several other factors could weigh on the pace of price rises ahead, she added.
“Price growth may wane if stronger market conditions improve seller confidence and spark a boost in stock coming to market. Interest rates also rose again in June and may rise further, which could slow the recovery,” she said.
“Though, interest rates are closer to their peak than not, and the shock of rate rises has lessened.”
Population growth, tight rental market conditions and a housing shortfall are also expected to remain, she said.
“If stronger demand holds up against the expected slowing of the economy, most capital city markets would return to positive annual price growth in the coming months,” she said.
In Sydney, prices have quickly rebounded this year, up 3% from a November 2022 low.
“If home prices continue to grow at the same pace as over the past quarter, they could return to positive annual growth by the end of June and surpass their prior peak by December 2023,” Ms Creagh said.
Raine & Horne Lower North Shore director Stuart Bourne said house prices were definitely on the up, with reserves being surpassed, which was a marked change from six months ago where they were being reduced, or just met.
“I would say buyers’ mentality is they’re comfortable with the rates where they are now,” he said.
So what I mean by that was when it was first coming up to (rises of) half a per cent, half a per cent, half a per cent, buyers were in a bit of shock each time.”
However, Mr Bourne said with commentary from the experts predicting there will likely be another 0.5% to 1% rise, many buyers were assessing their options.
“I think a lot of buyers in the current market look at that and go well, ‘Is that going to change our lifestyle?’ It’s only going to penalise them on terms of borrowing capacity,” he said.
“So, therefore they’re caught in this do we buy now with what we want? Or do we lose our capacity? We might save a few thousand but we’re going to be buying in an area that we don’t really want to buy in. So it’s a catch-22.”
PropTrack data suggests Melbourne property prices will potentially return to positive annual growth by October.
Scott McElroy, Belle Property Carlton principal, said buyer and seller sentiment within the owner-occupier market remained stable.
“There hasn’t been really any major reductions in values,” he said.
“The strong part of the market is probably young couples, professional couples between the $800,000 and $1.5 million market.
“Sub 500 ($500,000), there’s plenty of buyers. We just sold a one bedder in West Melbourne as big as a shoebox for $325,000 and it had 100 inquiries on it.
“So, there’s a lot of people who just want to get their name on a title and don’t want to pay rent and don’t want to move into a property and find out 12 months later they’re going to move out.”
Home prices in Brisbane are up 2% so far this year and could be on track to return to positive annual growth by July 2023, surpassing their prior peak by September 2023, Ms Creagh said.
Adelaide prices reached a fresh peak in May, up 2.6%.
“Home prices have hit fresh price peaks for the past eight consecutive months,” Ms Creagh said.
If the growth is maintained, Adelaide will continue to reach new price peaks throughout 2023.
Perth property prices have bucked the falling price trend and prices reached fresh peaks in May, up by 3.1% so far this year.
Sean Hughes, Realmark Coastal director, said he expected prices will skyrocket over the next few years.
“I think WA could see 40 or 50% growth in the next three years,” he said.
“The overarching thing above interest rates is supply and demand and no market in the world is different where it’s not affected by supply and demand issues,” he said.
“We have a massive undersupply…even if we had numbers where we are at the moment, and we just had a localised demand, we would have an increase in prices.
“But the demand is coming not just from locals. Such a big portion is east coast and overseas based (buyers). In 25 years of selling real estate, I’ve never seen as much inquiry from east coast and internationals.”
Canberra, Hobart, and Darwin
Canberra has recorded a rapid turnaround in prices, with home prices possibly returning to positive annual growth by October 2023. In Hobart prices could reach positive annual growth by March 2024, while in Darwin, prices could experience annual growth by August this year.