The Future of Australian Property: House Cost Forecasts for 2024 and 2025

Property costs across the majority of the nation will continue to rise in the next financial year, led by considerable gains in Perth, Adelaide, Brisbane and Sydney, a new Domain report has anticipated.

Across the combined capitals, home prices are tipped to increase by 4 to 7 percent, while unit costs are anticipated to grow by 3 to 5 per cent.

By the end of the 2025 financial year, the typical house rate will have surpassed $1.7 million in Sydney and $800,000 in Perth, according to the Domain Projection Report. Adelaide and Brisbane will be on the cusp of splitting the $1 million average home price, if they have not already hit seven figures.

The real estate market in the Gold Coast is anticipated to reach new highs, with costs predicted to increase by 3 to 6 percent, while the Sunshine Coast is expected to see an increase of 2 to 5 percent. Dr. Nicola Powell, the primary economic expert at Domain, kept in mind that the expected growth rates are fairly moderate in a lot of cities compared to previous strong upward patterns. She pointed out that prices are still increasing, albeit at a slower than in the previous financial. The cities of Perth and Adelaide are exceptions to this pattern, with Adelaide halted, and Perth revealing no signs of decreasing.

Homes are also set to become more pricey in the coming 12 months, with systems in Sydney, Brisbane, Adelaide, Perth, the Gold Coast and the Sunshine Coast to hit brand-new record rates.

Regional units are slated for an overall cost increase of 3 to 5 per cent, which "states a lot about affordability in terms of buyers being steered towards more affordable residential or commercial property types", Powell stated.
Melbourne's real estate sector stands apart from the rest, expecting a modest annual increase of as much as 2% for residential properties. As a result, the mean home rate is projected to stabilize between $1.03 million and $1.05 million, making it the most sluggish and unforeseeable rebound the city has ever experienced.

The Melbourne real estate market experienced an extended depression from 2022 to 2023, with the typical house cost dropping by 6.3% - a significant $69,209 decline - over a duration of five consecutive quarters. According to Powell, even with an optimistic 2% growth projection, the city's home costs will just handle to recover about half of their losses.
Canberra home prices are also expected to remain in recovery, although the forecast growth is mild at 0 to 4 per cent.

"The country's capital has actually had a hard time to move into a recognized healing and will follow a likewise slow trajectory," Powell said.

The forecast of approaching rate walkings spells problem for potential property buyers having a hard time to scrape together a down payment.

According to Powell, the implications vary depending on the type of buyer. For existing homeowners, postponing a choice may result in increased equity as rates are predicted to climb up. In contrast, novice buyers might need to reserve more funds. On the other hand, Australia's real estate market is still having a hard time due to affordability and repayment capacity concerns, worsened by the continuous cost-of-living crisis and high rates of interest.

The Reserve Bank of Australia has kept the main money rate at a decade-high of 4.35 percent given that late last year.

According to the Domain report, the limited availability of brand-new homes will remain the primary aspect affecting residential or commercial property values in the near future. This is because of an extended lack of buildable land, sluggish building and construction license issuance, and elevated building expenditures, which have actually limited real estate supply for an extended period.

In somewhat favorable news for prospective buyers, the stage 3 tax cuts will provide more cash to households, raising borrowing capacity and, for that reason, buying power throughout the nation.

Powell stated this could even more strengthen Australia's real estate market, but might be offset by a decline in real wages, as living expenses rise faster than wages.

"If wage development stays at its existing level we will continue to see extended affordability and moistened demand," she said.

Throughout rural and outlying areas of Australia, the worth of homes and houses is anticipated to increase at a consistent pace over the coming year, with the projection differing from one state to another.

"Simultaneously, a swelling population, sustained by robust influxes of brand-new locals, supplies a substantial boost to the upward pattern in residential or commercial property worths," Powell specified.

The current overhaul of the migration system might lead to a drop in need for regional realty, with the introduction of a brand-new stream of experienced visas to get rid of the incentive for migrants to reside in a regional location for two to three years on getting in the country.
This will suggest that "an even greater percentage of migrants will flock to metropolitan areas searching for better task prospects, hence dampening need in the local sectors", Powell said.

According to her, removed areas adjacent to urban centers would keep their appeal for people who can no longer pay for to reside in the city, and would likely experience a rise in popularity as a result.