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Despite five records set to be broken in Australia’s capital cities next financial year, price growth is moderating compared to previous years.
After years of double-digit price growth, the capitals are preparing for single-digit increases in the coming financial year.
Sydney and Brisbane are both set to see 6–8 per cent median house price growth, while Adelaide is expecting 7–9 per cent growth for houses, and Perth is forecast to see 8–10 per cent growth.
New records are expected to be hit for each of these four cities, with both Brisbane and Adelaide “likely joining the million-dollar club”, according to Domain.
The combined capitals are expected to hit a median house price of $1.16 million to $1.19 million, marking a new record.
Nevertheless, Australia’s price growth trajectory is still expected to slow markedly compared to recent years.
In Melbourne and Canberra, house prices are set to grow just 0–2 per cent and 0–4 per cent respectively.
“Gloomy” consumer sentiment, rising unemployment and declining real income may further dissuade Australians from purchasing homes in the country’s challenging property market.
Dr Nicola Powell, chief of research and economics at Domain, stated: “While the continued increase in property values is good news for Australians that own a home, we have to acknowledge that it’s becoming increasingly harder for many Australians trying to get into the property market.”
“We urgently need to balance the market and make it more affordable for Australians to own a home,” said Powell.
“In the year ahead, it would be good to see an acceleration in development approvals and initiatives such as incentives for construction – particularly for developers to build affordable housing where people want to live and with the infrastructure to support them. We should also be looking for better ways to utilise existing housing stock and ensure greater housing density in the right locations.”
Despite ongoing market challenges, Domain noted that supply shortages will continue to drive home prices upwards next financial year.
“We predict that population growth, construction challenges, and borrowing power will be the key drivers behind the price growth,” said Powell.
She pointed to the rollout of stage three tax cuts as a factor that may improve the borrowing power of many Australian households.
“In essence, some may opt to upscale their budgets, potentially making extra auction bids. For others, it could provide that extra borrowing capacity to bring more buyers to the market, speeding up their home ownership journey,” said Powell.
“All three factors will play a role in further driving up Australia’s home prices,” the economist concluded.
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