Unit prices are at a high in Brisbane,but were down 2.7 per cent in Sydney,5.5 per cent in Melbourne and more than 9 per cent in Canberra,Perth and Hobart.
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Powell predicts house prices across the combined capital cities to lift another 6 per cent to 8 per cent next year,and regional prices to be 2 to 5 per cent higher by year’s end. Sydney is earmarked for the strongest growth at 7 to 9 per cent,while forecasts are softest for Melbourne and Hobart,at 2 to 4 per cent growth.
The unit market is forecast to be more subdued,expected to end the year up to 3 per cent higher across the capitals and regional markets.
“We are expecting the undersupply of housing to continue to trump[the impact of] higher interest rates. There is the prospect of another rate hike early next year though and a cut late next year,so we could see prices wobble[but end the year up].”
Housing Industry Association senior economist Tom Devitt said it was incredible to see prices increasing amid the sharpest rate rises in a generation.
“[Prices] fell for a year and started to pick up again because of the migration[catch up],but even without migration,there was an underlying shortage[of homes],” he said.
The shortage was exacerbated during the pandemic,when the construction industry faced a perfect storm:an explosion in new housing demand that resulted in material and labour constraints – which blew out construction timeframes and cost – but were now easing.
Devitt expected an increase in homes for sale,off the back of stronger prices,would moderate price growth going forward. However,the mismatch between supply and demand – with dwelling approvals at about a decade low – would continue to put upward pressure on prices.
“We think price gains will start to slow,but there are forces moving in both directions,” he said.
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Devitt noted tax,regulatory and planning changes would be required to ensure enough new,affordable housing was being built,and higher and medium-density housing would be key.
Major banks arepredicting modest price rises in the major capitals next year,and interest rate cuts in late 2024. But some dissent has emerged and a recent forecast by prominent research house SQMpredicts price falls in Sydney and Melbourne next year.
Independent economist Stephen Koukoulas said there was evidence the market rebound was petering out,with price growth slowing,and expected it could turn negative in 2024.
“I’m not predicting a crash,but prices will probably be flat to slightly down next year,say 3 per cent nationally,the reason being that the labour market is starting to soften,” he said.
Koukoulas expects the unemployment rate could reach up to 4.5 per cent next year,which would weaken demand for housing,and put greater pressure on those already struggling to meet higher mortgage repayments,potentially leading to an uptick in distressed listings. Affordability constraints would also weigh on buyer demand.
The greatest weakness was tipped for Sydney and Melbourne where prices could drop up to 6 per cent.