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The major bank has predicted a gradual decline in house price growth over the coming two years.
In its mid-year Housing Pulse report, Westpac has continued to stick with its earlier claim that house prices would grow by just 6 per cent this year, compared to last year’s high of 10 per cent.
Westpac economists predicted that the decline would continue through to 2025, with just 4 per cent growth forecast for dwelling values.
“Sentiment-wise, consumers remain clearly torn between poor affordability, weighing heavily on assessment of time to buy, and positive price prospects,” the report observed.
“Slowdowns look slightly more pronounced in Sydney and Melbourne […] however, momentum is looking stronger in Brisbane and Perth, with both now tracking another year of double-digit growth.”
Senior economist Matthew Hassan stated: “Perth continues to be the hottest market in the country, closely followed by Adelaide and Brisbane, while growth is more subdued in Sydney and Melbourne, and patchy across the smaller capital cities and regional areas.”
This year, Westpac predicts Perth dwelling prices to increase by 14 per cent, only a minor downswing from last year’s 15.8 per cent growth rate.
Brisbane is forecast to grow 10 per cent, while Adelaide is predicted to grow 8 per cent, compared to much more modest predicted price growth of 5 per cent and 2 per cent respectively in Sydney and Melbourne.
“Supply – both in terms of properties on the market and the physical stock of housing – remains almost universally tight,” said Hassan.
“In Sydney, affordability is a major challenge with high prices causing some buyers to step back. However, limited supply is helping auction clearance rates to hold up relatively well.”
Meanwhile in Melbourne, a surge in investor selling in the second half of 2023, triggered by the Victorian government’s tax changes, has “created an overhang of stock that has yet to be absorbed”, according to Hassan.
In terms of the rental market, Westpac predicted a slowdown in price growth despite continued inadequate supply.
“The extent to which low vacancy rates are translating into higher rents appears to be moderating,” said Hassan, who observed that growth rates are “tracking back towards a single-digit growth pace” in all cities except Perth.
The bank attributed the rental slowdown to declining population growth as a result of the federal government’s tightening of visa criteria and the flow of international students into Australia.
