Australian house price rises seen extending through 2026 – Reuters poll
Australian home price rises will outpace overall inflation over the next couple of years, despite fading expectations of interest rate cuts, according to a Reuters poll of analysts who said the supply of affordable homes will keep falling short of demand.
Robust demand for housing and the failure of homebuilders to adequately increase supply has turned Australia into one of the world’s most expensive housing markets, severely limiting options for many new homebuyers who dream of owning a property.
After surging more than 25% during the pandemic, prices fully recovered those losses by the end of 2023, rising 8.1% over the year, in a quick turnaround that came despite the Reserve Bank of Australia (RBA) jacking up interest rates to a 12-year high of 4.35% in late 2023.
Economists in a separate Reuters poll do not expect the RBA to cut rates until the fourth quarter of this year.
The Reuters survey of 14 real estate analysts taken between May 10 and 28 expected home prices to rise 5.3% this year, a consensus view largely unchanged since August 2023. Analysts predicted a 5.0% rise in 2025 and 2026.
Housing markets rarely rise that steadily and consistently, especially when interest rates are changing. Yet supported by strong economic fundamentals, relatively low unemployment and a high influx of immigrants, Australia’s housing market has nearly always outpaced analysts’ estimates.
“Supply-demand imbalance has obviously taken the upper hand versus the capacity-to-pay issue. So we continue to see a very moderate positive growth for Australian house prices,” said My Bui, economist at AMP (OTC:AMLTF).
“We’ve under-built in the past two or three years already. So even if the supply picks up from here, we’ll still have a little bit of under-supply that we need to catch up (from) in the past two years or so.”
SHORT OF DEMAND
Asked about the supply of affordable homes over the coming two to three years, all eight who answered said it would be short of demand. Four of those eight said it would be far short.
Supply constraints, high mortgage rates and already- elevated home prices mean affordability for first-time buyers in the near term will worsen.
The average asking price of an Australian property was A$779,817 ($520,293.90) in April, according to CoreLogic, nearly eight times the average annual income.
It is close to 12 times in Sydney, where prices were forecast to rise 4.5% this year and 5.5% next.
“Unfortunately it’s very hard for first-time buyers because prices have gone up quicker than they can save a deposit and quicker than they can get into the market,” said Michael Yardney at Metropole. “They are suffering because the cost of living has gone up (and) the rents are sky-rocketing.
“The problem is the rich are getting richer. Those who own real estate, the value of their assets has gone up, in many cases double-digit growth over the last year. So, therefore, the house price has gone up considerably, but many people’s average income hasn’t,” Yardney added.
In a bid to help Australians overcome the housing crisis, the Anthony Albanese-led government has pledged to build 1.2 million homes by 2030.