PHOTO: Sydney, Australia. FILE
Australian house prices are poised for a significant upswing in the next two years due to a combination of record-high immigration and a highly competitive rental market.
Mark Bouris, the executive chairman of Yellow Brick Road, emphasized that the surge in immigration would particularly benefit Australians looking to invest in real estate. He noted that this is an opportune time for investors, as it is likely to exert upward pressure on rental rates, making property investment more appealing. He explained, “Investors are definitely interested in buying property and renting it out because most of the newcomers to Australia initially need to rent.”
Australia saw a record influx of 454,400 migrants in the year ending in March, with international students returning in significant numbers to address labor shortages. This figure surpasses the Treasury’s budget projections of 400,000 new permanent and long-term overseas arrivals for the 2022-23 fiscal year. The federal government anticipates that 1.5 million foreigners will migrate to Australia by July 2027.
Despite a series of 12 interest rate increases since May 2022, the property market is rebounding. High immigration levels are expected to be a driving force behind this recovery.
According to KPMG’s Residential Property Market Outlook report, a surge in property prices is predicted to begin at the end of 2023 and continue into mid-2025, largely due to the record-high immigration. The report emphasizes that the post-pandemic recovery in immigration will significantly increase housing demand and put additional pressure on the rental market.
Among Australian cities, Hobart is anticipated to experience the most substantial growth in property prices, primarily due to increased interstate migration. Although Hobart’s house prices were expected to decline by 3.5% in 2023, they are forecasted to recover and rise by 6% in June 2024, 11.3% by December 2024, and 14.2% by June 2025, resulting in a median house price increase from $690,085 to $835,362.
Melbourne, another city receiving a substantial share of new foreign arrivals, is expected to see property prices rise by 12% by June 2025, with the midpoint price increasing from $918,971 in June this year to $1.080 million by mid-2025.
Sydney, which attracts a larger share of new migrants, is expected to witness a 6.2% increase in median house prices in the year ending December 2023. This annual growth rate is projected to slow to 4.7% by June 2024 but then accelerate to 6.6% by December 2024 and surge to 10.3% by June 2025. If this prediction materializes, Sydney’s median house price would rise from $1.324 million in June 2023 to $1.529 million by mid-2025.
Canberra’s house prices are expected to rise by 1.2% in 2023, followed by increases of 4.4% in June 2024, 7% in December 2024, and 9.4% by June 2025. This would result in a median house price increase from $954,079 to $1.090 million.
Perth’s house prices are anticipated to surge by 8.2% in 2023, followed by annual growth rates of 8.4% in June 2024, 8% in December 2024, and 8.8% by June 2025. The midpoint house price in Perth is expected to rise from $615,793 to $726,261 over this two-year period.
Adelaide, known for its strong housing market performance, is projected to see a 6% increase in 2023, followed by a 5.8% rise in June 2024, a 5.6% increase in December 2024, and a 6.8% rise in June 2025. This would result in Adelaide’s median house price increasing from $712,421 to $804,996.
In contrast, Darwin is expected to experience a decrease in house prices of 3.98% in 2023, followed by another decline of 1.5% in June 2024. However, prices are anticipated to rebound with a 2.5% increase in December 2025 and a 5.1% rise in June 2025, resulting in a more modest two-year increase from $585,782 to $606,422.
Brisbane’s house prices are forecasted to rise by 3.7% in 2023, slow to 2.8% in June 2024, dip further to 2.6% in December 2025, before edging up to 4.2% in June 2025. This would result in Brisbane’s house prices climbing from $806,781 to $864,204.
Mark Bouris expressed confidence that mortgage stress, where borrowers struggle to meet their repayments, would not be a significant concern as interest rates remained relatively low, and many individuals had accumulated savings and multiple sources of income.
Regarding the former Reserve Bank governor Philip Lowe, Bouris believed that history would judge him favorably, despite criticisms during his tenure, as inflation appeared to be under control.
While inflation rose to 5.2% in August, up from 4.9% in July, it remained below the 32-year high of 8.4% reached at the end of 2022.
SOURCE: THE DAILY MAIL