By Stephen Johnson, economics correspondent for Daily Mail Australia
16:01 30 September 2023, updated 16:07 30 September 2023
- KPMG expects house prices to rise
- Immigration is credited with the promotion
- Mark Boris sees investors winning
- Read more: Westpac forecast
Australian house prices are expected to rise over the next two years due to high immigration rates and a very tight rental market.
Yellow Brick Road CEO Mark Boris said rising immigration rates would particularly benefit Australians wanting to invest in property.
“For investors, this is definitely an exciting time,” the mortgage broking tycoon told Daily Mail Australia.
The real estate market is recovering despite interest rates rising 12 times since May 2022.
Boris said the rise in immigration would particularly benefit investing landlords – at the expense of renters – as the national vacancy rate stands at 1.2 per cent.
“All it will do is put more pressure on rents, upward pressure, so investors…are definitely interested in buying properties and renting them out,” he said.
“Unfortunately, these people coming to Australia have nowhere to live, and most of them have to rent a house initially.”
A record 454,400 migrants moved to Australia in the year to March, with international students returning in large numbers as recruiters recruit skilled migrants to fill labor shortages.
This is already higher than the Treasury Budget forecast of 400,000 permanent and long-term new arrivals from abroad in the 2022-23 financial year.
The federal government expects 1.5 million foreigners to move to Australia in the five years to July 2027.
As inflation continues to rise, interest rates are expected to remain steady throughout 2024 and into early 2025 at the current 11-year high of 4.1 percent.
However, KPMG’s Residential Real Estate Market Outlook report forecasts a rise in property prices from the end of 2023, which will continue until mid-2025 due to rising migration rates.
“The post-pandemic migration rebound is expected to add significant pressures on housing demand,” said the report by economists Brendan Wren and Brian Tran.
“Strong population growth and limited housing supply are expected to put further pressure on the rental market.”
Hobart is expected to see the highest growth in property prices as smaller capital cities receive more interstate migration than other parts of Australia.
House prices in Hobart were expected to fall by 3.5 per cent in 2023, but they will recover next year to rise by 6 per cent in June 2024, jumping to 11.3 per cent by December 2024, and 14.2 per cent by June 2025.
This would cause the median home price to rise from $690,085 to $835,362.
Melbourne, another city receiving a large share of new foreign arrivals, is expected to see property prices rise by 12 per cent by June 2025.
These forecasts will see Melbourne’s midpoint rise from $918,971 in June this year to $1,080 million by mid-2025.
Sydney, which receives a larger share of new immigrants, is expected to see average house prices rise by 6.2 per cent in the year to December 2023.
Annual growth was expected to slow to 4.7 percent by June 2024, but pick up again to 6.6 percent by December 2024, then rise to 10.3 percent by June 2025.
If this prediction comes true, the median house price in Sydney will grow from $1.324 million in June 2023 to $1.529 million by mid-2025, based on CoreLogic data.
Canberra house prices were expected to rise just 1.2 per cent in 2023, but accelerate to 4.4 per cent in June 2024, 7 per cent in December 2024, and 9.4 per cent by June 2025.
This would cause median home prices in the nation’s capital to rise from $954,079 to $1,090 million.
House prices in Perth are expected to rise by 8.2 per cent in 2023, before the pace of annual growth picks up to 8.4 per cent in June 2024, 8 per cent in December 2024, and 8.8 per cent by June 2025.
This would cause the city’s median home price to rise from $615,793 to $726,261 in just two years.
Adelaide, one of Australia’s strongest performing housing markets, is expected to enjoy a 6 per cent increase in 2023, followed by a 5.8 per cent increase in June 2024, a 5.6 per cent increase in December 2024, and a 6.8 per cent increase in June. 2025.
This will take the price of an Adelaide home at the mid-point from $712,421 to $804,996
Darwin in Australia’s tropical north is expected to buck the trend, with prices falling by 3.98 per cent in 2023, before falling by a further 1.5 per cent in June 2024, but rising by 2.5 per cent in December 2025 and by 5.1 per cent in June. 2025.
The price increase over two years will be more modest, rising from $585,782 to $606,422.
Brisbane house prices are expected to rise by 3.7 per cent in 2023, slowing to 2.8 per cent in June 2024, and 2.6 per cent in December 2025 before rising to 4.2 per cent in June 2025.
This will push home prices in the city from $806,781 to $864,204.
Boris said he was no longer concerned about mortgage stress as borrowers could not pay their bills leading to forced selling as periods of ultra-low 2 per cent fixed interest rates came to an end.
“Initially, my thesis was that it would happen, but it didn’t,” Burris said.
“We are in the middle of the cycle of people having to move from fixed to variable and there has not been any noticeable increase, in terms of arrears and delinquencies.
“There’s been a slight increase but it’s still historically low, so just for my own business, we’re seeing some tough orders — maybe four or five, I’m not talking hundreds or thousands.”
“I don’t see any pressure on mortgages right now.
“People have accumulated savings, people have gotten two or three jobs and an extra job or extra hours, and unemployment is really low (3.7 percent) relatively.”
Boris said history would also judge former Reserve Bank governor Philip Lowe, who expired on September 17.
“A lot of people criticized the outgoing RBA governor – perhaps time will show he was very competent given the direction inflation seems to be heading at the moment,” he said.
Inflation rose in August to 5.2 percent, compared to 4.9 percent in July, but is well below the 32-year high of 8.4 percent reached at the end of 2022.