WHEN WILL HOUSE PRICES BE BACK TO THEIR 2022 PEAK ?
Nerida Conisbee | Chief Economist , Ray White Group
We ’ re now consistently seeing house price growth across every Australian capital city . Like every downturn , we ’ ve seen prices fall far less than what ’ s generally predicted . Housing markets almost always surprise with strength on the upside and see far less robust declines when the market turns . It ’ s certainly the case this cycle with peak to trough decline of Australian capital city house prices of 6.5 per cent , compared to COVID driven price growth of 36 per cent . Leading the way are the cities that saw the biggest falls last year . Sydney ’ s prices fell by 11.8 per cent last year but have increased 4.1 per cent since December . Melbourne dropped by nine per cent but is now up three per cent .
House prices have now been rising for three consecutive months , suggesting that this is more than just a one off change in market conditions . Given the complexity of property markets , the increase is not unexpected . Rents are now rising at their fastest pace ever recorded , driven by an imbalance in supply and demand . This imbalance is now flowing through to house prices . There ’ s a shortage of properties for sale , as well as a shortage of new homes being built . At the same time , population growth is back to pre-pandemic levels . It may be more expensive and difficult to get finance but this is being offset by not enough homes .
The shortage of homes will not be fixed quickly . With prices recovering , we ’ re likely to see the number of homes for sale increase but the number of new homes remain constrained . A report recently released by the National Housing and Finance Investment Corporation ( NHFIC ) has calculated that Australia will have a shortage of 100,000 homes over the next four years . Ensuring adequate housing supply is the most effective way to ensure housing affordability , both for renters and buyers . Prices and rents are unlikely to drop again any time soon .
If prices continue to rise at their current levels , when can we expect them to be back to their 2022 peak ? Assuming that the rate of price growth continues as it has over the past three months , Australian median house prices will be back to where they were at the peak of 2022 in September 2023 . The cities that are expected to get back to peak quicker are Darwin and Adelaide . Sydney , Melbourne and Hobart are expected to take a bit longer but would still hit that level in October 2023 .
These dates could change however . We ’ re now likely at the peak of interest rates and if they start to come down this year , this will accelerate price growth , particularly in cities like Melbourne and Sydney . More negatively , if unemployment starts to rise , this could slow the pace of change .
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