This article is from the Australian Property Journal archive
WHILE Australians will have more money in their pockets from next week with the introduction of stage three tax cuts, already-strained affordability and another delay to interest rate cuts will provide a drag on house price growth in the coming year.
REA Group’s PropTrack, in its Property Market Outlook Report, is expecting prices nationally to rise 2% and 5% in 2025 financial year, following a 5.9% rise in the financial year to date (FYTD) across what has been a “resilient” market, led by Perth, Adelaide and Brisbane.
Perth will continue to lead price increases again in FY24, albeit slower than the 18.9% in the FYTD, at between 8% and 11%. PropTrack is tipping. Brisbane will come back from 12.2% to between 3% and 6%, while growth will ease in Adelaide from 12.9% to between 5% and 8%,
PropTrack director of economic research and report author, Cameron Kusher, said forecasting home price growth for the year ahead becomes “increasingly challenging”.
He told Australian Property Journal, “Obviously, what’s happening is affordability is extremely stretched.”
“We’ve also got a very weak economy at the moment. The unemployment rate is still extremely low, but we do expect the unemployment rate is going to lift from here.
“An increase in the unemployment rate will temper demand for housing – obviously, stretched affordability will do that – and yes, we do get stage three tax cuts starting next week, but I think that will be tempered somewhat by the fact that the expectations of when interest rates are coming has been pushed back much further out.”
“For all of those reasons, we are expecting price growth to slow generally, particularly in those three markets that have seen really strong price increases.”
While price growth will slow, house prices are still forecast to hit yet more record highs.
He does not expect yesterday’s inflation data, which returned a higher-than-expected headline figure of 4.0%, to impact PropTrack’s forecasts. The inflation figures prompted some analysts, such as UBS, to now predict a rate hike as soon as August, while NAB was among those that pushed out its expectations of a rate cut by six months.
PropTrack’s price growth forecasts for Sydney and Melbourne in the next financial year top the FYTD figures in both cities. Sydney is looking at 3% to 6% growth, from 5.8% in the FYTD, while Melbourne will increase from 0.8% growth to between 3% and 6%.
“That would likely be driven by a moderation in stock on market, also it’s probably more likely to happen over the second half of this next financial year as we see the impact of tax cuts flowing through, but also as we get closer to interest rate cuts next year, which are likely to happen,” Kusher told Australian Property Journal.
The market has been stronger this year than many analysts had been anticipating.
“Obviously we’ve had more stable interest rates through the first half of this year – and until a couple of months ago people were expecting a rate cut in the second half of this year, which now looks extremely unlikely to happen – that was driving some of the strength in the market as well,” Kusher said.
“Mainly it comes back to the fact that in most parts of the country, the supply of stock for sale has continued to be really low. If we look through late last year, we started to see a lot of new listings come to the market in Melbourne and Sydney and we thought that the rest of the country would follow suit – and that hasn’t come to fruition,” he said.
“And also, just the fact that over recent years prices have risen so much, people have got so much equity in their property that that’s allowed them to upgrade as well.”
