24.10.2023

House prices expected to surge in 2023

Sydney, Brisbane, and Perth housing markets are poised to experience a remarkable 12% surge in property prices this year, as per an upgraded forecast by NAB, which credits the soaring demand and ongoing supply shortages. This positive outlook coincides with growing confidence among property experts, marking the highest levels of optimism in about two years.

NAB has substantially revised its previous house price predictions, anticipating an 8% rise in property prices across the combined capital cities in 2023, with a further 5% increase projected for 2024. In contrast, NAB's July forecast suggested a 4.7% price increase for this year, followed by a 5% rise in 2024. The significant supply-demand imbalance, rising interest rates, and reduced borrowing capacity continue to bolster property prices. Additionally, robust population growth and a healthy labour market are expected to persist in the short term.

Alan Oster, NAB's Group Chief Economist, noted, "We have revised our near-term dwelling price outlook, with expectations that the CoreLogic eight-capital city dwelling price index will close the year with an 8% increase, following stronger-than-expected outcomes in recent months." Read more

Brisbane is set to outperform other cities in 2023, with house prices predicted to surge by 12.1%. Meanwhile, Perth is expected to experience an 11.9% increase, and Sydney is poised for an 11.6% rise in property prices. Adelaide follows with a forecasted increase of 8.6%, and Melbourne is anticipated to see a more modest rise of 4.7%. However, Hobart is expected to witness a decrease of 3.3%.

NAB's previous July projections had suggested a 7% increase in Sydney house prices, a 2% increase in Melbourne, and a 5.4% increase in Brisbane. Adelaide was expected to see a 3% rise, Perth a 6% increase, and Hobart a 6.4% decline.

Dwelling prices have been consistently upward in the major capital cities throughout the third quarter of the year. Since the beginning of the year, they have risen by approximately 8%, nearly reversing the previous nine months' decline.

The latest NAB survey indicates that confidence levels among property professionals have continued to rise in the third quarter, with heightened expectations for a housing market recovery in the coming years. NAB's one-year confidence measure increased by 50 points, while the two-year measure strengthened by 54 points, reaching their highest levels in approximately two years, well above long-term averages.

Expectations for house price growth in the next 12 months have improved across the country, except the ACT, where it has fallen by 1%.

Property professionals have reported a significant shortage of rental housing supply, with a net 79% describing their local rental markets as undersupplied. Rising interest rates remain the most significant constraint for existing property buyers nationwide, followed closely by a lack of available inventory, particularly in Western Australia. Access to credit and property price levels also pose significant challenges for buyers in most states, except Western Australia, while employment security and alternative investment returns have the least influence on homebuyers' decisions.

NAB's latest survey results also reveal a growing presence of foreign buyers, reaching a 5.5-year high of 10.1% in total market sales for new housing. Meanwhile, first-home buyers' overall market share in new housing markets has declined to a nearly eight-year low of 30.3%.

For more information, please visit the original article by Nila Sweeney at The Australian Financial Review, nila.sweeney@afr.com.au.

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