By Donie Collins, Director of DMC Property
What’s Ahead for Property in the New Financial Year?
Australian home prices are forecast to rise again over the next 12 months, although the pace of house price growth is expected to be slower compared to the last two years. According to Domain's FY25 Price Forecast Report, there will be a marginal acceleration in price growth for units in some markets.
Australian Home Prices
On the house price front, Perth, Adelaide, Sydney, and Brisbane are expected to lead price gains, reaching new records. Sunshine Coast, Gold Coast, and regional Australian house prices are also anticipated to hit record highs. By the end of FY25, house prices are forecasted to surpass $1.7 million in Sydney and $800,000 in Perth, with both Brisbane and Adelaide likely joining the million-dollar club.
Unit Prices
Turning to unit price forecasts, Sydney, Brisbane, and Adelaide are expected to lead price gains. Unit prices across Sydney, Brisbane, Adelaide, Perth, Gold Coast, Sunshine Coast, and regional areas will reach record highs. While unit price growth is anticipated to accelerate slightly in Melbourne and Canberra, Sydney's forecasted growth remains similar to the 2023 calendar year and FY24. Melbourne and Canberra are the only cities where unit price growth is expected to surpass that of houses according to Domain.
Drivers Behind the Price Growth
Dr Nicola Powell, Domain's Chief of Research and Economics, identifies population growth, construction challenges, and borrowing power as key drivers behind the price growth. She explains that demand has risen due to changes in housing composition, demographic shifts, and robust population growth. An increase in single-person households and a decrease in household size amplify housing demand, further compounded by migration.
Home building has struggled to keep up with population growth due to land scarcity, weak building approvals, and high construction costs, exacerbating the existing structural undersupply. This limited supply of new homes on the market will continue. Dr Powell also highlighted that as of 1 July, stage 3 tax cuts will increase Australians' borrowing capacity and buying power, potentially driving up home prices further.
Final Note
Dr Powell acknowledges that while the continued increase in property values benefits homeowners, it poses challenges for Australians trying to enter the property market. She stresses the urgent need for more supply to balance the market and make homeownership more affordable. The government has prioritised housing, but a collaborative effort from all levels of government and industry is necessary to find a solution.
In the year ahead, an acceleration in development approvals and initiatives like construction incentives, particularly for affordable housing, is essential. Better utilisation of existing housing stock and ensuring greater housing density in the right locations are also crucial. For sellers, strong demand and limited supply make FY25 a favourable time to sell. For buyers, exploring various suburb options and being ready to act swiftly when finding the right property is vital.
Reach out directly to Donie Collins for a tailored approach to your property investment strategy and selection process.
This article is provided for general information only and does not take into account the specific needs, objectives or circumstances of the reader. Before acting on any information, you should consider whether it is appropriate for your personal circumstances, carry out your own research and seek professional advice.
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