House prices nationwide are poised to surpass previous peaks later this year, with strong migration, tight rental markets and low stock levels reversing the sharp falls of 2022 much sooner and quicker than expected according to Eleanor Creagh, Senior Economist at Proptrack.
Creagh paints a picture of a market that not only dodged the major price falls many of the property pessimists anticipated but is setting itself up for above-average annual growth in many markets.
Considering we're in an era of relatively high-interest rates, that's a show of surprising strength and resilience in our housing markets
As national home prices cycle through an eighth month of growth — the longest uplift since the pandemic boom — it's clear the property market bottomed out at the close of 2022.
The PropTrack Home Price Index above highlights that national home prices have been on an eight-month upward trajectory, the longest such streak since the pandemic hit.
Moreover, prices are just 0.75% below the March 2022 peak.
The stats don't lie; despite the steepest downturn on record from March to December 2022, national home prices are making a robust comeback.
If national home prices continue to grow at the same pace as over the past quarter, the prior peak could be surpassed by November 2023.
This would mean the year would end with national annual price growth of 5.1%.
Home price growth this year has been led by the capital city markets, predominantly Sydney.
If capital city home prices continue to grow at the same pace as over the past quarter, the prior peak could be surpassed in as little as 2 months (October 2023).
That would mean annual capital city price growth of 6.49% by the end of the year — a little over long-term average growth.
As Creagh notes, Sydney's housing market is spearheading this recovery.
Since bottoming out in November 2022, home values in the city have shot up by 6.19%.
This rebound could see Sydney end 2023 with a staggering 8.9% price rise, a rate that not only surpasses previous peaks but does so with impressive speed.
If Sydney home prices continue to grow at the same pace as over the past quarter, the prior peak could be surpassed by October, and 2023 could end with prices up 8.9% – a quicker recoup of price falls than in 2019, albeit from a shallower downturn (prices fell 11.51% from peak to trough in 2017/2018).
The strong pace of annual growth is remarkable in the face of the substantial deterioration in affordability that occurred with the sharp rise in interest rates.
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It is also a testament to the strong demand aided by the pick-up in population growth, and limited supply that has offset the effects of higher interest rates.
In contrast to Sydney's quick recovery, Melbourne has seen a slower, more steady price growth trajectory.
This isn't necessarily a bad thing, especially as Melbourne has performed strongly in the long term when compared to other capital cities.
Another city capturing attention is Brisbane.
Home prices have surpassed previous peaks, and the city looks poised to end 2023 with an 8% increase in home prices.
Brisbane's median house value sitting at just 63% of Sydney's suggests a powerful blend of growth and affordability, making the city an increasingly attractive option for investors.
If prices continue to grow at the same pace as over the past 3 months, home prices in Brisbane would be set to end the year up 8.0%, which would be close to double the average annual growth since 2010.
Despite the lack of fanfare, both Perth and Adelaide have managed to buck the negative trends seen in the rest of the country in 2022.
Their strong performance this year could set both cities up for an exceptional close to 2023, with predicted annual growths of 8% and 9.8%, respectively by Proptrack.
Creagh foresees some rebalancing of supply and demand dynamics, particularly in Sydney and Melbourne.
The strong flow of new listings could provide buyers with more choice and more bargaining power, potentially slowing the strong rise in prices.
However, with stable interest rates and a tight labour market, she believes there's a good chance this increased supply will be swiftly consumed.
Further out, as affordability continues to worsen and the economy slows, this begs the question of whether the strong price rises of this year can continue.
But high levels of migration coupled with lower new supply and an emergent housing shortfall is likely to continue to cause prices to lift despite affordability remaining stretched.