Curious about what the future holds for the Australian property market?
Well, Domain is predicting that property prices will keep rising during the year to June 2025, despite many Australian householders grappling with affordability and serviceability limits.
However, different rates are expected across the major capital cities:
● Sydney: House prices are forecasted to grow between 6% and 8% during the 2024-25 financial year, reaching a median of around $1.75 million. Unit prices are expected to increase by 4% to 6%.
● Melbourne: House prices are predicted to rise by 0% to 2%, reaching up to $1.05 million. Unit prices might grow by 2% to 4%.
● Brisbane: Expected growth of 6% to 8% for houses, pushing prices close to $1 million. Units might see a 4% to 6% increase.
● Perth: Leading with the highest predicted growth of 8% to 10% for houses, reaching around $850,000. Units are expected to rise by 4% to 5%.
● Adelaide: Forecast to grow by 7% to 9% for houses, reaching nearly $1 million. Units are expected to increase by 4% to 6%.
● Canberra: House prices are predicted to grow by 0% to 4%, reaching around $1.07 million. Unit prices might increase by 1% to 4%.
Factors pushing property prices higher
Australia’s property market is being driven higher by several key factors.
Firstly, the country is experiencing rapid population growth, largely fueled by high migration levels.
Recent Australian Bureau of Statistics data shows the population grew by 2.5 per cent to 26.97 million people in the 2023 calendar year, with net overseas migration accounting for 84% of the growth,
This influx of people increases demand for housing, putting upward pressure on property prices.
Secondly, the supply of new homes isn’t keeping pace with this demand. Factors such as land scarcity, weak building approvals and high construction costs are limiting new developments.
As supply tightens, buyers often find themselves competing more fiercely, which drives up property values.
The Stage 3 tax cuts, effective from July 1, will increase household incomes. With more disposable income, potential buyers will be able to afford higher mortgages, enhancing their borrowing capacity and buying power.
This financial boost will allow more people to enter the market, increasing competition for available properties.
Potential downward pressures
While upward trends are strong, several factors could exert downward pressure on property prices.
Real incomes are declining as living costs rise faster than wages, making it harder for people to save for a home. This stagnation in income growth could dampen the ability of individuals to afford housing, thereby reducing demand.
Additionally, unemployment is predicted to increase to 4.5% meaning fewer people would be able to afford to buy homes. Job insecurity often leads to a cautious approach towards large financial commitments like property purchases. As a result, the pool of potential buyers could shrink.
Gloomy consumer sentiment due to persistent high inflation and interest rates may also play a role. If consumers feel uncertain about their financial future, they might delay property purchases.
Why it could be a good idea to buy now
Despite the mixed outlook, there are several reasons why buying now could be beneficial (if your financial circumstances allow).
With the Stage 3 tax cuts increasing household incomes, borrowing capacity is likely to improve. This means you might be able to afford a better property or secure a mortgage more easily.
Then there are the anticipated interest rate cuts later in the 2024-25 financial year, which could further enhance affordability by making it cheaper to borrow.
Moreover, property has historically been a stable long-term investment. Even in the face of short-term fluctuations, real estate tends to appreciate over time. Therefore, buying now could mean capitalising on future growth.
For first home buyers, entering the market now might be advantageous before prices rise further. Even if growth is slow in some areas, property prices are generally expected to trend upward over time. This could be an excellent opportunity to secure your place in the property market before it becomes even more competitive.
Whether you are a first home buyer, upgrader or seasoned investor, Shore Financial can help you get a new home loan. To discuss your options, call us on 1300 416 700, email us on info@shorefinancial.com.au or fill in this online form
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