She said despite Melbourne predicted to overtake Sydney as the most populous capital in the next decade or so, its strong growth was not translating to higher house prices – yet.
“There is going to be a point in time where Melbourne is going to be perceived as undervalued,” she said. “We’re expecting Brisbane to be very close to a million bucks by the end of the financial year, and by the end of the calendar year of 2025 we’re expecting Adelaide house prices to be surpassing $1 million. So what you’ve got are these other, typically more affordable, cities chasing the tail of Melbourne in terms of price points.”
AMP Capital chief economist Dr Shane Oliver said he also expected to see moderate house-price growth across the country except for Canberra and Melbourne.
Prices are tipped to rise as demand continues to oustrip supply.Credit: Steven Siewert
“You’re really looking at a continuation of the multi-speed property market that we’ve been seeing for the last year, where some cities, particularly Perth, are shooting the lights out and others are lagging. Or you’d say Melbourne is languishing,” Oliver said.
He said changes to land tax in Melbourne had meant investors were increasingly pulling out of the market, creating more supply and keeping prices stable.
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“There’s been a notable rise in listings in Melbourne compared to other cities, that’s going to be a drag for some time to come through the next financial year. Part of that is the property tax changes, and property investors are thinking, ‘Well, this isn’t the place to be, I’ll invest somewhere else’.”
He said some of those investors were likely to be looking west – given Adelaide and Perth continued to see strong price increases, which was supported by tight rental markets.
The report forecast Perth’s median house price to increase by 8 to 10 per cent. Its median would reach $840,000 to $856,000 by mid-2025. Adelaide was forecast to rise by 7 to 9 per cent, reaching a median of $965,000 to $984,000.
HSBC chief economist Paul Bloxham said the smaller capitals had begun to catch up to the capitals in their housing markets after falling behind.
“If you rank up the cities, and you look at their relative prices, which ones look like they’ve moved out of line? The smaller capitals like Perth, for example, had fallen a long way behind,” Bloxham said. “We have more strength in our forecasts in the smaller capital cities than we do in the larger ones.”
He said Melbourne was also experiencing a hangover from the pandemic, with internal migration away from Victoria continuing, despite strong growth in overseas migration.
“You’re seeing people moving away from Victoria to other states more than you have done in the past,” he said. “The best way to describe it is sort of long tail, disruptive effects associated with the pandemic, and the pandemic related policy response are still impacting Victoria more than elsewhere.”
Unit prices were also predicted to lift in all major city; Sydney, Brisbane and Adelaide were the strongest, followed by Perth, Melbourne and Canberra.
“Tight rental markets [are] pushing people to make a purchase, placing demand on units rather than houses – I think it’s affordability. Also, we’ve increased the cost of debt, and we have lower borrowing capacities – that’s also steering demand towards units,” Powell said.