Australia's house prices declined -0.14% over the month, the smallest monthly fall since May 2022, when rate hikes commenced.
According to Corelogic research, Australia's national median dwelling value delivered a 6.8% annual growth rate over the 30 years to March 2022, with the 1992-2002 period providing the largest capital gains. The middle decade (2002-2012) saw national dwelling values increase by 59%, while the most recent decade increased by 72%.
The average annual growth rate for well-located capital city properties is about 7%, which means that Australia's median dwelling price should be around $1.1 million in 2030. But some properties will outperform others by 50-100% in terms of capital growth, so take these house price predictions with a big pinch of salt.
Melbourne's house prices have risen an average of 7.9% per year over the last 40 years, and are predicted to reach $1.5 million in 2030 for houses and $985,000 for units. However, Melbourne didn't experience the strong property price growth other capitals enjoyed during the once-in-a-generation boom of 2020-21.
Sydney's capital city dwellings sit at a median of $1.006 million, with $1.21 million for houses and $769,773 for units.
According to realestate.com.au, Sydney house prices will average nearly $1.8 million by the end of the decade, if they continue rising at the same pace as the last 30 years.
As Australia's financial capital, Sydney will continue to experience strong population growth and will benefit from major new infrastructure projects including the $12 billion Sydney Metro.
CoreLogic data shows that Brisbane's median property price has increased by 340% (5.1% per annum) over the past 30 years. Therefore, investors may assume that Brisbane house prices could reach $1.2 million by 2030.
Perth's median house price reached $587,274 in March 1, and the city's unit prices sat at $406,225. After rising 25.9% over the Covid period, Perth dwelling values are now down 0.6% since peaking in July 2022.
CoreLogic data suggests that Adelaide house prices could reach $1 million in 2030, and $700,000 for units if the annual compound growth rate of 5.2% is maintained.
Some property pessimists will suggest the last few decades have been particularly good for property, but in fact Australia's property market has remained resilient through high interest rates, low interest rates, high inflation, low inflation, governments of both major persuasions, changes to our tax system, overseas wars, and challenges to our economy.
Focus on investment-grade property and don't get lured into thinking you're getting a bargain. Well-located townhouses on a decent land size will also make excellent investments, and are currently in strong demand by many first-home buyers being priced out of the market.
It makes sense that many investors are concerned about the value of their property, particularly in the current market when increasing borrowing costs, lower borrowing capacity, and sluggish demand are putting downward pressure on prices.
Many may be questioning how much their investment property will be worth 3 months, 6 months, or even 1 year from now.
But, as we know, property investment is a long-term game.
So in my mind, the question they should be asking is: What are the predicted house prices in 2030 in Australia?
So let’s unpack how we expect the market to evolve over the next 7 years and look at some of the key trends facing house prices.
First, let's look at where house prices are today.
CoreLogic’s national Home Value Index (HVI) shows a sharp reduction in the rate of decline through February.
The national index declined -0.14% over the month, the smallest monthly fall since May 2022 (-0.13%), when rate hikes commenced.
- The median dwelling price for Australia now sits at $702,136.
- The median dwelling price for our combined capital cities now sits at $761,674.
- The median dwelling price for our combined regional towns sits at $575,916.
According to Corelogic research, Australia’s national median dwelling value delivered a 6.8% annual growth rate over the 30 years to 2022.
Across each of the past three decades, at a macro level, it was the 1992-2002 period that provided the largest capital gains, with CoreLogic’s national Home Value Index (HVI) rising by 77%.
The middle decade (2002-2012) saw the national HVI rise by 59%, while the most recent decade has seen national dwelling values increase by 72%.
This helps to give some kind of indicator about where property prices will head next.
Some economists predict a 40-50% growth in Australia's house prices between now and 2030.
This isn’t surprising because it’s often said that over the long term, the average annual growth rate for well-located capital city properties is about 7% (and we know that prices have risen 6.8% per annum over the past 30 years), which would mean, in general, well-located properties should double in value every 7-10 years.
That would put Australia’s median dwelling price at around $1.1 million in 2030.
But, if nothing else, what the pandemic years have shown us is that no matter how many times you forecast property prices, it will always be difficult to predict exactly where property prices will be in three months' time, let alone in 7-10 years into the future.
Note: History shows us that some properties will outperform others by 50-100% in terms of capital growth, so strategic property investors who buy investment-grade properties could expect to see the value of their properties more than double within the next seven to 10 years.
After all, that's how averages work - some properties will outperform, and others will underperform.
In other words, we always have to take these house price predictions with a big pinch of salt.
But of course, other investors will manufacture capital growth through renovations or development which is another way to help beat the averages.
Nonetheless, what I do see is that there are emerging trends and shifts in our property market which will serve to hold up prices in the mid-long term.
I’ll talk more about that later.
First, let's dive into predicted house prices for each major city over the next 7 years.
As of March 1, Melbourne’s capital city dwellings averaged $743,554 – with a reported median price of $897,222 for houses and $585,366 for units.
Looking back the Melbourne property market has been one of the strongest and most consistent performers over the last four decades.
Over the last 40 years Melbourne’s median house prices have risen an average of 7.9% per year, and 7.73% for units over the 40-year period.
So, assuming that we can expect the same growth for the remainder of the decade, that could put Melbourne’s house prices as high as around $1.5 million in 2030, and just over $985,000 for Melbourne units.
Obviously, this past price growth wasn't the same each and every year, as the Melbourne property market worked its way through the typical property cycles, so these figures are a very rough guide only based on historical annual increases.
In fact, Melbourne didn't experience the strong property price growth other capitals enjoyed during the once-in-a-generation boom of 2020-21.
Of course, being the most locked downed down city in the world during Covid didn't help.
Note: However, Melbourne’s strong population growth and some large infrastructure spending will underpin Melbourne’s economic growth moving forward.
Victorian residents can look forward to these major infrastructure projects:
- The 15.8 Billion North East Link road project will transform how people move around the city.
- The $11 billion Melbourne Metro Tunnel will allow more than half a million additional people per week to use Melbourne's railway system during peak periods.
- The $10 billion Westgate Tunnel
- The $10 Billion Melbourne Airport Rail Link is a game-changing public transportation project that, for the first time, connects Melbourne Airport to Victoria's rural and metropolitan train network.
- The M80 Ring Road upgrade ($2,25 billion) and the Monash Freeway Upgrade ($1.37 billion)
- Plus the Monash rail line ($475 million) and Frankston to Baxter rail line ($225million) upgrades
As of March 2023, Sydney’s capital city dwellings sit at a median of $1.006 million - that’s a combination of $1.21 million for houses and $769,773 for units.
Given Aussie Home Loans and CoreLogic data shows that Sydney prices grew at an average annual rate of 5.4% in the years between 1990 and 2020, there are high expectations for price increases over the next 7 years.
That’s if they continue rising at the same pace as the last 30 years.
Apartment buyers will also notice a sharp increase in prices, with the median unit price expected to rise to $1.26 million in 2030, the modelling suggests.
As Australia’s financial capital, Sydney will continue to experience strong population growth.
Note: As more people move to the city, there will be increased demand for housing, and as many Sydney is a city of knowledge workers who enjoy higher incomes, demand from this demographic will put upward pressure on house prices.
And these new residents will get the benefit of some major new infrastructure projects including:
- The $12 billion Sydney Metro will feature 31 Metro railways stations.
- The $16 billion WestConnex highway project
- A $15 billion Pacific Highway upgrade and a $450 million Princes Highway upgrade.
- The $5.3 billion Western Sydney Airport.
- A $2.4 billion Paramatta light rail
These projects will deliver high-paying jobs and contribute to the growth of Sydney’s economy which will in turn drive further Sydney house price growth.
As the economy continues to grow, people will have more disposable income to invest in buying their homes.
Today, Brisbane’s median property price sits at $694,495 - or $767,781 for houses and $490,997 for units.
CoreLogic data shows that Brisbane dwelling values increased by 340% (5.1% per annum) over the past 30 years.
So investors may assume that should the average 5.1% per year price increase continue going forward for the next 7 years, median house prices could rise to as much as nearly $1.2 million by 2030 and units to just under $750,000.
As I’ve already mentioned, this is obviously just a rough guide, but Brisbane’s strong population growth and infrastructure spending should underpin long-term property price growth.
The Queensland government has budgeted $37.6 Billion of infrastructure spending in the next 4 years.
Moving forward Greater Brisbane will benefit from a flurry of major infrastructure projects including:
- Cross River Rail ($5.4 billion) is a new 10.2-kilometre rail line between Dutton Park and Bowen Hills, with 5.9 kilometres of twin tunnels beneath the Brisbane River and the CBD
- The Gabba Redevelopment – Value $2.7 billion
- Brisbane Live ($2.5 billion) Located at a key CBD transit hub, a new 18,000-seat entertainment arena complex will be serviced by underground rail and busway infrastructure.
- Queens Wharf
- The Brisbane Metro ($1.244 billion) will be an important part of Brisbane's larger transportation network, which will connect the city to the suburbs.
- The New Queensland Cancer Centre – Value $750 million
As of March 2023, Perth’s median dwelling price sat at $561,740 according to CoreLogic data.
The city’s median house price reached $587,274 while units sat at a $406,225 median.
Note: Unlike in Sydney, Melbourne, and Brisbane, property prices in Perth have been relatively flat for most of the past decade.
Now after rising 25.9% over the Covid period, Perth dwelling values are now down 0.6% since peaking in July 2022.
And over the past 30 years, CoreLogic data reveals that the city has recorded the nation’s lowest annual growth rate over the period, at 4.8%.
Assuming a 4.8% annual growth rate over the next 7 years, Perth’s house prices could reach around $850,000 and the city’s unit prices as high as around $560,000 in 2030.
As of March 2023, Adelaide’s median dwelling price sat at $645,812 - $694,653 for houses and $436,567 for units.
According to CoreLogic data, Adelaide housing values increased by 357% over the past 30 years, equating to an average annual compounding growth rate of 5.2%.
Using this figure to project house prices in Adelaide for 2030 would suggest that Adelaide’s house prices could reach up to and even exceed $1 million, and close to $700,000 for units in 7 years’ time.
- Also read:This week’s Australian Property Market Update – Latest Data, State by State November 28th, 2023
- Also read:The Boom and Bust of our Property Cycles: A Journey Through the Investor’s Mind
- Also read:Latest property price forecasts for 2023 revealed. What’s ahead in our housing markets in the next year or two?
- Also read:The 10 Safest Cities to Live in Australia
- Also read:Everything you need to know about the state of Australia’s property markets in 20 charts – November 2023
As they say…past performance isn’t always the best predictor of the future and clearly, some housing trends are likely to change going forward.
Also, these figures don’t take inflation into account, but even so, these figures are pretty impressive.
Over the long term, Australian house, prices outperformed, and the rate of inflation significantly.
Some property pessimists will suggest the last few decades have been particularly good for property and it’s not fair to suggest things will be the same moving forward.
However, I would argue that they have been lots of problems and challenges for Australia’s economy and property market over the last 30 years.
Sure Covid was a big surprise, but interestingly their property markets boomed during this pandemic.
But over the last decades, we have had high-interest rates and low-interest rates, high inflation, and low inflation, governments of both major persuasions, changes to our tax system, overseas wars, and challenges to our economy.
In fact, the list goes on and on, but our property markets remained resilient.
Yet history also showed us that while property values are difficult to predict in the short term, over the long term our strong population growth and the wealth of our nation have pushed up residential property values in Australia.
Another important factor underpinning Australia’s house price resilience is the fact that 70% of us own or are paying off our homeowner-occupiers dominate the market.
Here’s a relatively current snapshot of the national property market:
- There are 10.9 million residential dwellings Australia-wide, with a total value of $9.4Trillion
- These are spread across around 15,000 suburbs
- An additional 130,000 to 160,000 new dwellings are added every year (this is not enough)
- The total debt against these dwellings is $2.2 trillion, giving an overall Loan to Value Ratio for residential property of around 24%)
- Residential real estate makes up 57% of Australian household wealth
- Investors own around 27% of Australian dwellings by number, and 24% by value.
- There are more than 2.1 million individual property investors in Australia
- Each property investor in Australia owns an average of 1.28 properties
There 3 important trends which are likely to shape housing markets over the next 7 years, and which can help to provide valuable insight into how property prices may be supported into 2030… and beyond.
1. Birth rates are low
In 2021, the number of birth registrations in Australia was just shy of 310,000.
This was a 5.3% increase on the 2020 figure of 294,369.
Since 2008, births have generally exceeded 300,000 each year, but the fertility rate has declined since that time.
It reached a low of 1.59 in 2020, before increasing slightly to 1.70 in 2021.
It's important to recognise that the ABS data is based on registrations and these numbers can be influenced by lags in the process.
Lower birth rates may cause a shift in what the Australian household looks like, which in turn creates a shift in what people need from their homes.
2. Immigration is booming
ABS data shows that in the year ending 30 June 2022, overseas migration contributed a net gain of 171,000 to Australia's population.
This represents a very large increase in net overseas migration compared to the 2020-21 financial year – which saw a net loss of 85,000 people.
These are faster net immigration levels than at the peak of the mining boom.
Westpac also highlights a huge surge in student visas, with likely up to another 50,000 Chinese students suddenly on their way back to Australia in due course.
Add in the natural growth of the population and this suggests that population growth is running at record levels at an annualised pace of over 500,000.
So what does this mean for our property market?
Demand… and an oversupply of it.
Charter Keck Cramer data reveals that around 70% of overseas migrants enter the rental market upon arriving in Australia.
The data also shows that around 36% of migrants enter the apartment markets upon arriving in Australia, particularly in Sydney where 56% of migrants occupy apartments in contrast to Perth with the lowest percentage at just 18%.
Around 49% of overseas migrants enter the detached housing markets upon arriving in Australia, according to the data.
This is highest in Perth (where 67% are house occupiers) and lowest in Sydney (33% are house occupiers).
What is interesting is that there is a consistent transition from renting into owning, and from occupying apartments or townhouses into detached houses, in the 20 years from the date of arrival.
But the greatest proportion of migrants takes around 4-7 years from arriving in the country to make the transition, no matter what capital city they live in.
It’s clear that no matter where these migrants go, Australia’s population influx will put a rocket under our property markets over the next few years.
3. Affordability will return
Australia's big four banks and the money markets are now predicting the peak of interest rate is very close and that interest rates likely to start falling the soon are later this year or early next year.
This is good news for the property markets.
Property prices have steadily fallen from their peaks in early-2022, in large part due to hiked borrowing costs cutting many would-be buyers out of the market.
And those who can still afford to borrow can’t afford to take out as much.
The lower demand has put downward pressure on prices.
But a bottoming out of the cycle would mean that potential homebuyers on an average income can return to the market, reinvigorating sales, pushing up demand, and therefore putting a shelf under prices over the long term.
The system that we use at Metropole, which has helped many clients build substantial portfolios with properties that double in value in less than 10 years, uses what I call our top-down approach (going from the macro to the micro).
This starts with examining the macro factors affecting our property markets and drills down to the micro level.
Here are the 6 steps:
- We start by looking at the big picture (the macroeconomic environment).
- We look for the right state to invest in (one that will outperform the Australian market averages because of its economic growth and population growth).
- We look for the suburbs that will outperform with regard to capital growth (generally gentrifying neighbourhoods with the right demographics)
- We look for the right location within that suburb (investment-grade locations are key here)
- We look for the right property (investment-grade properties within those investment-grade locations)
- The (not cheap) right price.
Tips: Remember: Focus on investment-grade property!
The most important focus for investors is to look for investment-grade property.
‘Cheap’ property will always be ‘cheap’ so don’t get lured into thinking you’re getting a bargain.
Over the next few years, I expect that house prices will grow more than apartment prices, but well-located townhouses on a decent land size will also make excellent investments and are currently in strong demand by many first-home buyers being priced out of the market.
Now that doesn’t mean apartments won’t make good investments, some will.
I see family-friendly apartments in the middle ring suburbs of our capital cities being in strong demand by singles and young couples who want to enjoy the amenity of great locations but can’t afford houses or townhouses.
And the fact that construction costs for new apartments are soaring means that new developments will need to come on the market at significantly higher prices, pulling up the value of established apartments.
Note: No matter how many times you review the data, it's important to remember that it is near impossible to predict exactly what house or unit prices will look like in 2030.
After all, the pandemic showed us how quickly things can change.
What we do know is that demographics, immigration levels, population, the wealth of our nation, and housing affordability will continue to be key trends to watch going forward.