Where Are Australian Home Costs Headed? Forecasts for 2024 and 2025

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

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

According to the Domain Forecast Report, by the close of the 2025 fiscal year, the midpoint of Sydney's real estate rates is expected to exceed $1.7 million, while Perth's will reach $800,000. Meanwhile, Adelaide and Brisbane are poised to breach the $1 million mark, and might have currently done so by then.

The real estate market in the Gold Coast is expected to reach new highs, with rates projected to increase by 3 to 6 percent, while the Sunlight Coast is expected to see a rise of 2 to 5 percent. Dr. Nicola Powell, the primary economic expert at Domain, noted that the anticipated growth rates are relatively moderate in the majority of cities compared to previous strong upward trends. She pointed out that costs 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 showing no indications of decreasing.

Rental costs for apartments are anticipated to increase in the next year, reaching all-time highs in Sydney, Brisbane, Adelaide, Perth, the Gold Coast, and the Sunshine Coast.

According to Powell, there will be a basic cost increase of 3 to 5 per cent in local units, indicating a shift towards more affordable property alternatives for buyers.
Melbourne's home market remains an outlier, with anticipated moderate annual development of as much as 2 percent for houses. This will leave the typical house rate at between $1.03 million and $1.05 million, marking the slowest and most irregular recovery in the city's history.

The 2022-2023 recession in Melbourne covered five successive quarters, with the average house cost falling 6.3 per cent or $69,209. Even with the upper projection of 2 per cent development, Melbourne house rates will only be simply under midway into recovery, Powell stated.
Home prices in Canberra are expected to continue recuperating, with a projected mild development ranging from 0 to 4 percent.

"According to Powell, the capital city continues to deal with challenges in accomplishing a steady rebound and is anticipated to experience a prolonged and sluggish rate of progress."

With more cost increases on the horizon, the report is not motivating news for those trying to save for a deposit.

"It suggests different things for different kinds of purchasers," Powell said. "If you're a current property owner, rates are expected to rise so there is that aspect that the longer you leave it, the more equity you may have. Whereas if you're a first-home purchaser, it might imply you need to conserve more."

Australia's real estate market remains under considerable stress as families continue to grapple with affordability and serviceability limits amid the cost-of-living crisis, heightened by sustained high interest rates.

The Australian reserve bank has preserved its benchmark rate of interest at a 10-year peak of 4.35% considering that the latter part of 2022.

The scarcity of brand-new real estate supply will continue to be the primary motorist of property prices in the short term, the Domain report said. For years, housing supply has been constrained by scarcity of land, weak structure approvals and high building and construction expenses.

A silver lining for potential homebuyers is that the approaching phase 3 tax decreases will put more cash in people's pockets, thus increasing their ability to take out loans and ultimately, their purchasing power across the country.

Powell stated this might even more boost Australia's housing market, but may be balanced out by a decrease in real wages, as living expenses increase faster than salaries.

"If wage growth stays at its current level we will continue to see extended price and moistened demand," she said.

Across rural and suburbs of Australia, the worth of homes and apartment or condos is expected to increase at a stable pace over the coming year, with the forecast varying from one state to another.

"At the same time, a growing population propped up by strong migration continues to be the wind in the sail of home rate growth," Powell said.

The revamp of the migration system might trigger a decrease in local property need, as the new skilled visa path gets rid of the need for migrants to live in regional locations for two to three years upon arrival. As a result, an even larger portion of migrants are likely to converge on cities in pursuit of remarkable employment opportunities, subsequently minimizing demand in local markets, according to Powell.

However regional locations close to cities would remain appealing places for those who have been evaluated of the city and would continue to see an influx of need, she added.