New modelling has revealed just how much home prices could rise in the next five years if the current growth trajectory continues.
By 2029, human-like artificial intelligence will be a reality, most new cars will be electric and the iPhone 21 will have just dropped.
Australia’s population will have hit 30 million, and 1.2 million more new homes will have been built, assuming the federal government’s controversial housing target is achieved.
And if property prices keep growing at the same rate as over the past five years, homes in once-affordable strongholds on the outskirts of the capitals will have million-dollar price tags.
Modelling of property price growth by PropTrack has revealed how much home values would change by 2029 if the trends seen over the past five years continue.
PropTrack senior economist Paul Ryan said the modelling wasn’t a forecast, but showed just how extraordinary the rate of price growth has been over the past five years and revealed what that would mean for prices if the same growth was repeated.
“It highlights the exceptional things that happened over the past five years – obviously Covid, but also record low interest rates, a huge shift towards larger homes and lifestyle locations, and increasingly, affordable locations,” he said.
Once-affordable suburbs where prices could surge
The analysis suggests that many capital city suburbs targeted by buyers seeking affordable houses will no longer be an option for those with modest budgets, assuming prices keep growing at the same rate.
Instead, high-density suburbs with lots of apartments will remain within reach, given prices haven’t grown as fast in these areas.
In this scenario, a home in Elizabeth North in Adelaide’s northern suburbs, currently worth around $400,000, will cost buyers $937,000 by 2029 if values grow as fast as over the past five years.
In Perth, prices in Camillo in the city’s south east have increased by 97% over the past five years to a median of $453,000. If that growth continues for the next five years, a typical home there would be worth $892,000.
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The median price in Werribee South could crack $1 million by 2029 if prices keep growing at the same rate. Picture: realestate.com.au/buy
A property in Werribee South in Melbourne’s outer west that costs $700,000 today would be worth $1.054 million in five years’ time.
And in Sydney, a home in Caddens near Penrith, where the median price is $1.263 million, would have almost doubled in value to $2.47 million, while a typical home in Denham Court in the city’s outer south west worth $1.18 million would rise in value to $2.14 million.
This Caddens house sold for $1.255 million this year. It could be worth almost $2.5 million by 2029 if prices grow as fast as over the past five years. Picture: realestate.com.au/sold
On the other hand, suburbs like Lakemba and Harris Park in Sydney and Newstead, West End and Hamilton in Brisbane would remain somewhat affordable especially for buyers seeking apartments, given prices haven’t rapidly escalated in these areas in the past five years.
Prices in Melbourne suburbs like Broadmeadows, Dandenong, West Footscray and Sunshine West would stay relatively affordable too, with houses remaining within reach of first-home buyers.
The ultra-premium suburbs of the future
Meanwhile, many desirable and pricey suburbs would become ultra-premium areas in this scenario, with multi-million price tags for homes in these areas rising even higher.
You would need a $5 million budget to buy into Haberfield in Sydney’s inner west, while a home in Putney would be worth just shy of $7 million.
If prices in Putney double again in the next five years, this $3.5 million house could be worth $7 million by 2029. Picture: realestate.com.au/sold
Mr Ryan said these suburbs were already very expensive and would continue to grow in value, although perhaps not as fast.
“I’d be surprised if those suburbs achieve that growth again over the next five years, but over the longer period it’s reasonable to think these suburbs will become more and more premium,” he said.
If prices grew as fast in Brisbane, buyers looking in Samford Valley, Rochedale and Fig Tree Pocket would need to spend about $3 million for a typical home.
Meanwhile, family-friendly suburbs in the middle rings of the capitals could plausibly keep growing in value at roughly the same rate, given these types of suburbs tend to remain popular for family buyers in their peak earning years, pushing prices into multi-million dollar territory.
Rochedale’s median price grew by 85% over the past five years, meaning it will hit $3 million by 2029 if this growth is repeated. Picture: realestate.com.au/sold
That would mean suburbs like Oatley and Pennant Hills in Sydney, Vermont South and Wheelers Hill in Melbourne and Robertson in Brisbane could all become multi-million suburbs, with median prices between $2 million and $3 million.
“Economic fundamentals will push prices around, but they’re always going to have continued appeal,” Mr Ryan said. “It’s just the relative affordability of those areas that will change over time.
Real estate agent and McGrath Oatley principal Matthew King said well-connected suburbs such as Oatley that appealed to established families were more likely to deliver the same rate of growth as the past five years.
“Oatley has always been a high performing suburb,” he said. “You’ve got the ultimate lifestyle for people looking for easy access to the city for work, but also the local village, shops and waterways.”
“We get a lot of buyers from the Inner West because they can commute to the city but still have that family lifestyle.”
Middle-ring suburbs like Oatley that are prized by families could steadily rise in value, but prices would be influenced by interest rate movements. Picture: realestate.com.au/sold
Outside the capitals, a repeat of the growth of the past five years would cause some of the most popular coastal suburbs to double in value once again, making a sea change much more expensive.
Buyers would need almost $4 million to buy a home in Sunshine Beach in Queensland, $3.6 million to buy a home in Austinmer south of Sydney, and $2.7 million to buy in Lorne on Victoria’s Surf Coast.
Could history repeat itself?
While some market trends seen over the past few years could continue into the future, others probably won’t be repeated.
Mr Ryan said another doubling in home values in popular coastal areas was unlikely, but some areas would perform better than others.
With interest rates still high, affordable suburbs could remain in demand with buyers facing borrowing constraints.
Property prices in Lorne in Victoria increased by 79% over the past five years, but a repeat of that growth might not happen in the next five years. Picture: realestate.com.au/buy
“Across cities the more affordable regions are outperforming,” Mr Ryan said. “I don’t see that demand waning.”
“Whether that lasts the next five years is another question, but I definitely see that continuing over the next year or 18 months.”
Mr Ryan said it was likely there would be increasing investor and first-home buyer interest in units over the next five years, given that’s where new housing development would be focused.
Affordability and strong rental yields are likely to drive both first-home buyers and investors towards apartments over the next few years. Picture: realestate.com.au/sold
Meanwhile, areas that became popular during the pandemic and when interest rates were low, such Victoria’s Mornington Peninsula or the Central Coast north of Sydney were less likely to rise in value as fast as the previous five years, Mr Ryan said.
“The Central Coast and Mornington Peninsula have had their price revaluations, so now will likely see prices grow in line with their capital city areas,” he said.
Will Melbourne catch up?
Prices in Melbourne in general may increase in the future at a faster rate than over the past few years, Mr Ryan said.
Melbourne has experienced sluggish growth since the pandemic began amid a population exodus to other states and a higher rate of home building, but investment is increasing and the city is projected to eclipse Sydney as Australia’s most populous city.
The median property price in Flemington in Melbourne’s inner north declined by 10% over the past five years, but a further fall of that magnitude isn’t likely, given Melbourne is looking better value in comparison to the other large capitals. Picture: realestate.com.au/sold
“I’m reasonably bullish on Melbourne,” Mr Ryan said. “I think it’s underpriced at the moment relative to Brisbane and Sydney.”
“The thing that suppressed Melbourne prices is they’ve done a better job on construction than other areas.
“This is a good news story – Melbourne is showing that when you build more homes, it keeps a lid on housing prices.”
“In terms of what happens going forward, it will depend on the construction outlook.”
Higher levels of housing constructions have kept Melbourne prices in check compared to the other capitals. Picture: Getty
While the projection offers an interesting perspective into what could potentially unfold, it’s not necessarily indicative of what’s likely to happen and shouldn’t be used solely as the basis of investment decisions.
Buyers looking for the next suburb to boom would be wise to keep in mind the often-cited disclaimer: past performance isn’t always a reliable indicator of future results.