What Are the Predicted House Prices in the Next 10 Years in Australia?

When it comes to real estate, one of the most common questions is "What will happen to house prices in the future?"

Dawn Teh

When it comes to real estate, one of the most common questions is "What will happen to house prices in the future?" 

It's a tough question to answer since there are so many factors that can affect the Aussie property market. 

Nevertheless, there are a few things that we can look at to get an idea of where prices might be headed — this includes interest rates, inflation, and population growth. 

In this article, we look at what experts have to say about Australian house prices in the next 10 years to inform your next real estate move. 

Disclaimer: This article is intended to be general in nature and is not personal financial product advice. It does not take into account your objectives, financial situation, or needs. In particular, you should seek independent financial advice and read the relevant product disclosure statement (PDS), or other offer documents before making an investment decision in relation to a financial product (including a decision about whether to acquire or continue to hold).

How much have house prices increased in the last 10 years?

Median house price June 2012 Median house price Mar 2022 % change
Sydney $642,425 $1,590,932 +148%
Melbourne $535,000 $1,092,144 +104%
Brisbane $433,000 $831,346 +92%
Adelaide $395,000 $750,084 +90%
Perth $475,000 $622,030 +31%
Hobart $370,000 $758,141 +105%
Darwin $570,000 $635,389 +11%
Canberra $494,125 $1,124,952 +128%
8 capital cities average $519,768 $1,069,289 +106%

Over the past 10 years, Australian house (not including units) prices have more than doubled. Plus, data from Domain shows that the median house price across the 8 Australian cities was more than $1 million in March 2022. 

The COVID-19 pandemic was a key driver of the major housing price growth between 2020 and 2021 with the national median house price first surging past a record $1 million last year. According to KPMG economist, Dr. Brendan Rynne, this was due to several factors including low supply and low cash rates set by the RBA during the period to support the market. 

To tame inflation, the Reserve Bank of Australia (RBA) has since implemented a series of interest rate rises which caused housing price falls in the latter part of 2022.

A Proptrack report states that the median dwelling price was 3.4% lower in September 2022 compared to the peak in March 2022. As of October 2022, the median dwelling price (including homes and units) across the capital cities stands at $787,485. Sydney, NSW is currently leading the price tumble with a 9% drop since the start of the year. 

The downturn that we're currently seeing is likely to continue into 2023 as the RBA is expected to continue with rate hikes.

Will property prices double in 10 years?

In an ideal world, any homeowner would want to see their residential property double every 10 years. But according to Corelogic's Research Director, Tim Lawless, this is an event that rarely happens, despite it being a widely-held belief.  

Property prices don't usually double every 10 years

Even though our data above shows that housing values have doubled in several cities between 2012 and 2022, bear in mind that this is only talking about house prices and doesn't include units. 

Past data shows that while there are periods of rapid growth, prices also go through periods of stability or even decline. So it's hard to predict what phase of the cycle the property market will be in 10 years later.  

Corelogic reports that Australia has generally gone through 3 different periods of growth over the past 30 years. First, between 1992 and 2002 where the Home Value Index (HVI) across the nation rose by 77%. From 2002 and 2012 the HVI went up by 59%, and in the past 10 years, we saw a 72% increase. 

But there are significant differences when you compare local markets on a state level or look at metropolitan versus regional areas. In Perth, home prices went up by 104% between 2002 and 2012 because of the mining boom. But the subsequent bust led to a meagre 14% increase in the most recent decade. Other states like Queensland and the NT also saw a similar trend because of the demand for natural resources from China. 

Similarly in Hobart, we saw a weaker market from 1992 to 2002 with values increasing by a mere 30%. But the past 10 years saw property prices almost double because of supply issues and increased migration. 

Population growth could drive up real estate prices

So the median dwelling price most likely won't double by 2032. What will it be in that case? It's difficult to tell — even for experts. However, the longest period of declining house values has been 21 months. So the current decline we're seeing will most likely plateau before recovering towards a growth trend.  

How long that growth trend will last is anyone's guess. but we can also look at population growth forecasts to get an idea of what the housing market will be like in the long term. 

The Intergenerational Report (IGR) published by the government in 2021 states that we can expect our Australian population to reach 38.8 million by 2060-2021.

That's a lot more additional people that will need roofs over their heads — creating scarcity and driving prices up. 

While this still can't tell us exactly what the market will be like 20 or even 10 years later, we can be certain that there will be changes to accommodate this growth. 

We'll see more medium- to high-density living outside the CBD which could be something investors will want to look into in the coming years.  

Overall, Australia's economic, social, and political fundamentals remain strong which means that experts are forecasting continued growth in the long term. 

Time in the market vs timing the market — which is better?

Looking at the property trends from the past 30 years often sparks the age-old debate about whether "time in the market" or "timing the market" is a better property investment strategy. 

Time in the housing market refers to simply holding onto a property for a long period of time, regardless of what the market is doing. This strategy can be successful if you're aiming for stability and are confident in the general uptrend over a longer period. 

Timing the market, on the other hand, involves buying and selling properties based on market conditions in the short term to maximise profits. This approach can be riskier, but it can also lead to greater rewards if done correctly.

The truth is that there is no easy answer to which is better, and the best strategy depends on a number of factors. 

However, when we look at trends over the long term, time in the market generally outperforms timing the market. 

Here's why.

Australia has different states — each with its own property cycles and mini cycles within each of those macro cycles. 

The ups and downs vary in terms of length across different locations and are affected by a host of factors that a person simply cannot predict with 100% accuracy. This includes things like interest rates, macroeconomic influences, social demographic changes, and more. 

There have been analyses (not just in terms of real estate but general investing as well) showing that after you account for all the profits and losses over a long period of buying and selling using the "timing the market strategy", you end up at the same place (if not worse) compared to simply staying invested. 

Real estate prices tend to rise steadily over time, despite occasional dips. By investing for the long haul, you are more likely to see significant appreciation in your property value. 

At OwnHome, we're advocates for "time in the market". This is why we help home buyers to enter the market as soon as possible. Here's how it works: we help all customers navigate home purchases and get onto the property ladder, without needing hundreds of thousands up front in deposit savings. If you’re considering buying a home and would like to learn more you can use the buying power calculator or sign up to talk to someone from the team.

Will house prices drop in 2023?

Housing prices are slightly easier to anticipate in the short term, and some experts have already started making predictions. 

Here's what the big banks have to say:

NAB expects that some states will see a 23% overall drop in home prices between 2022 and 2023.  

This is because the RBA is most likely going to continue raising cash rates in the near term and will probably only start to ease hikes in the first half of 2023.  

Here is a statement from the RBA that was released on 1 November 2022: 

"The Board expects to increase interest rates further over the period ahead. It is closely monitoring the global economy, household spending and wage and price-setting behaviour." 

At a state level, Commonwealth Bank and Westpac have reported that there will likely be an 18% decrease in Sydney and Melbourne property values. 

Me Bank has also given an estimate that prices in Brisbane and Adelaide may drop by 8% and 6% respectively.

Hobart could see a decrease of 12% and 10% for Canberra.

They also anticipate that the smallest price fall may be in Perth and Darwin with a drop of 8% and 7% respectively. 

However, ANZ economist, Adelaide Timbrell, adds that we can expect things to pick up again in 2024 and with a possible 5% increase in home prices.

What does this all mean for home buyers? Is 2022 and 2023 the time for you to purchase a home? It all depends on your current financial and personal goals, along with your time horizon. 

If you can afford the current high mortgage rates, you might be able to take advantage of the current lower home prices.  

James Sheffield, who is the Head of Home Loans at Me Bank, suggests that if you're planning on being the owner-occupier of the property, you might not need to worry so much about price fluctuations in the short term. Your game plan at this point should be about buying a home you love and can afford.  

You can also expect strong competition in the refinancing market as fixed rate loans are set to expire over the next year. 

Home buyers are also going to try and save as much as they can on a home loan considering the increased cost of living and high inflationary environment.

How do interest rates affect property value?

Among the many factors that can affect Australian property prices, interest rates are perhaps the most important. 

When interest rates are low, monthly mortgage repayments are more affordable. This increases the demand for property, and prices will rise. 

If interest rates rise sharply, mortgage repayments go up and become less affordable. This would lead to a decrease in demand and a fall in prices. 

Existing owners may also be unable to afford repayment increases which means there will be more people defaulting on their home loans which also contributes to price declines. 

How often do interest rates change in Australia?

The RBA reviews the cash rate at its monthly board meeting (except in January). If it decides to change the rate, this will usually take effect within a few days. However, the RBA does not always change rates at every meeting. Sometimes it leaves rates unchanged for several months in a row.

What major city has the most affordable housing?

Housing affordability continues to be a key issue for many across all states — especially for first home buyers. So if you're wondering which is the capital city with the cheapest houses, it's Perth, followed by Darwin, then Adelaide.  

The lowdown: What will houses be worth in 2030?

Unfortunately, it's difficult to say for sure what will happen with such a long time frame. But in the short term, we'll most likely continue seeing a downtrend moving into early 2023 before a possible uptrend in the later half. 

Seeing that we'll most likely have population growth and a limited supply of available housing, it's possible that we'll also see an overall rise in house prices over the next decade as well.

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