Domain house prices report: sydney melbourne prices tipped to soar

House prices are tipped to soar in the coming year despite the aggressive rate hikes because of high immigration.

Property market group Domain is forecasting a six to nine per cent surge in Sydney house prices between now and June 2024 and a two to five per cent increase in unit values.

Melbourne house prices were tipped to increase by zero to two per cent as Brisbane values went up by one to four per cent.

Even the smaller capital cities were tipped to see an increase with Adelaide house prices forecast to rise by two to five per cent as Perth prices climbed by one to three per cent.

Hobart house prices were predicted to rise by three to five per cent as apartment values increased by one to three per cent.

Canberra house prices were expected to rise by two to four per cent.

The predictions are being made even though the Reserve Bank has already raised rates 12 times since May 2022, marking the most aggressive hikes since 1989.

Economists at Westpac, NAB and ANZ expecting two more hikes in July and August that would take the cash rate to a 12-year high of 4.6 per cent.

Dr Nicola Powell, Domain’s Chief of Research and economics, said high immigration would drive a house price recovery.

‘Population pressures will lead the charge in factors driving housing demand and property prices higher over the next 12 months,’ she said.  

‘Australia has seen an exponential increase in temporary and permanent migration since the international border reopened in late 2021 to alleviate skills shortages. 

‘Of course, unlike natural population growth, those arriving from overseas aren’t already housed. 

‘This puts us in a position where in the next financial year alone, nearly 130,000 extra dwellings will be needed, with the eastern seaboard receiving the largest share of migrants.’

Australia’s population last year grew by 1.9 per cent, with a net migration increase of 387,000, which included the permanent intake of skilled migrants and the long-term cohort of international students. 

Treasury is expecting a record 400,000 migrants to move to Australia this financial year, which has led to most cities having an ultra-tight vacancy rate.

Sydney’s median house price fell by 9.2 per cent in the year to May, to $1.294million, CoreLogic data showed.

It had peaked at $1.417million in April 2022 before the Reserve Bank began hiking rates in May 2022 for the first time since November 2010. 

Dr Powell said Sydney house prices would peak again within a year from now. 

‘Sydney’s recovery will be slow but steady after steep downturns in 2022,’ she said.

‘House prices will be at a new record high by the end of the next financial year.’

Reserve Bank of Australia Governor Philip Lowe last month told a Senate economics committee hearing that housing supply was failing to keep pace with population growth

Reserve Bank of Australia Governor Philip Lowe last month told a Senate economics committee hearing that housing supply was failing to keep pace with population growth.

‘The population’s increasing by two per cent this year. Are there two per cent more houses? No,’ Dr Lowe said.

‘The rate of addition to the housing stock is very low.

‘We’ve got a lot of people coming into the country, people wanting to live alone, it doesn’t work.

‘The way that this ends up fixing itself, unfortunately, is through higher housing prices and higher rents.’