Property Price Forecast For 2021 & Beyond

August 27 2021

"The property market has done well the past couple of months, and many speculate further growth in the future." - Jesse Lee, Digital Product Manager

What’s the outlook for the Australian property markets for 2021 and beyond?

This is a common question people are asking now that our real estate markets are up and running again after virtual auctions and sight unseen purchases took place in 2020.

News from the biggest banks and Australian economic experts are predicting house price growth across almost every segment of the market.

Those I spoke to, and who have released forecasts of their own, are predicting property price growth of 12 per cent per cent - 20 per cent per cent across Australia this year. They expect the trend will almost certainly continue until the end of 2022.

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Historically low-interest rates and FOMO (fear of missing out) have driven dwelling prices to record new highs – but we’ve only recently surpassed previous 2017 peaks, which means double-digit price growth is on the horizon for many areas around Australia in 2021.

AMP Capital's Shane Oliver in particular said, "the forces that have driven average Australian capital city property prices well above trend and well above price-to-income ratios seen in comparable countries over the last two decades may be at, or close to, having finally run their course."

We’ve taken a look at a handful of the state capital property markets, how they’ve performed since COVID hit, and what is being forecast to the end of 2021.

Melbourne Forecast

While Melbourne property prices suffered because of its extended lockdown which severely impacted market activity in 2020, commencing in late October the Melbourne property market has rebounded strongly and is likely to deliver double digit price growth over the next 12 months.

Apartment prices were up just 0.4 per cent in July, contributing to a growth of 1.9 per cent for the quarter and 6.1 per cent in the year to date. The median apartment price in Melbourne is now $612,711.

Dwelling values overall, have increased 11.1 per cent in the past seven months, carried primarily by house price growth of 13.3 per cent in that period.

Property of every type remains in high demand across regional Victoria, especially those with easy access to the capital city with units seeing price growth of 15.7 per cent since January.

Overall, experts forecast property prices will rise roughly 16 per cent by 2021's end.

Sydney Forecast

Extremely strong demand for property in Sydney’s inner and middle-ring suburbs has led to Sydney house prices seeing double digit price growth, apartments however have taken longer to bounce back from covid.

Apartment prices are up 5.1 per cent over the quarter to be up 10 per cent in the year to date. Of that growth, 1.6 per cent happened in July with similar showings in February and March. Sydney’s median unit value is now just over $810,000.

Interestingly enough it is Regional NSW that is seeing the strongest growth in the apartment sector with values shooting up 7 per cent this quarter to be up 14.5 per cent in the year to date. 

It is worth noting that the greatest increase in property prices across NSW are seen in the priciest properties and this holds true in both the house and unit markets.

Overall, experts forecast property prices will rise roughly 19 per cent by 2021's end.

Brisbane Forecast

Brisbane’s house prices remained resilient over 2020 when other markets were impacted by the economic impact of COVID-19.

Now, moving forward, the Sunshine State will shine with strong demand for homes, particularly in lifestyle areas, likely to deliver double digit capital growth over the next 12 months.

Brisbane apartment values have increased 2.7 per cent over the quarter, in line with 6.2 per cent in the year to date. 

Median apartment values have hit a high of $419,143.

Several of the economists I spoke to including Terry Ryder and Westpac's Bill Evans tipped housing prices to surge 20 per cent between 2022 and 2023. 

Hotspotting's Terry Ryder clarified that 89 per cent of suburbs across Brisbane are seeing price growth and was tipping it to become Australia's property leader in the coming months and years.

It’s also worth keeping in mind the Brisbane 2032 Olympics which will positively impact property values now and in the future.

Overall, experts forecast property prices will rise roughly 16 per cent by 2021's end.

Canberra Forecast

Canberra’s property market has been described by many as a “quiet achiever” with dwelling values reaching a new peak after growing 14.2 per cent over the last year.

Considering a large percentage of Canberra's population is employed by the government or industries supporting the public sector, Canberra’s property market has not really felt the effects of the coronavirus recession like other capital cities did.

Due primarily to the ongoing apartment developments popping up across Canberra, like those from Geocon, unit values are up 1.3 per cent this month, making up a large chunk of the 2.8 per cent price growth this quarter. Apartment prices are up 6.5 per cent in the year to date. 

Median apartment prices are currently $520,900.

Moving forward, the Canberra property market will continue to enjoy solid but slower property price growth, due primarily to slow population growth.

Overall, experts forecast property prices will rise roughly 17 per cent by 2021's end.

Perth Forecast

Perth’s long-awaited recovery was interrupted midway by COVID-19 but now Perth’s housing market is back on a recovery trajectory, with home values posting a 7.5 per cent increase in the year to date.

Perth continues to be the most affordable capital city for houses in the country and this along with a record-low mortgage rate, improving economic conditions and government incentives has set it up for strong price growth this year.

This has also seen strong benefits for the apartment market which has been neck and neck with houses and even outperformed them this quarter, seeing 2.3 per cent growth compared to 1.5 per cent. Units were up 0.6 per cent for July, while houses saw growth of 0.3 per cent.

Apartment values are up 6.8 per cent since January achieving a median price of $404,257.

Overall, experts forecast property prices will rise roughly 19 per cent by 2021's end.

How does my property impact the economy?

Real estate affects the economy because it makes up a large portion of individual and business wealth across economic sectors.

When real estate prices rise, wealth increases, so individuals and businesses are more likely to borrow and spend.

This can be seen in recent times with the average Australian savings account decreasing ~$7,000 from May to April as prices start to spike, however this can also be largely attributed to a reducing fear of COVID-19

When your home rises in value it increases the overall value of the economy. When real estate prices rise, wealth increases, so individuals and businesses are more likely to borrow and spend.

What’s causing the rise in home prices?

The primary factor causing the current boom in home prices are the continuing low mortgage rates and low interest rates. 

Plus with Australia’s excellent response to Covid 19 transmission seeing business reopening well and an increasing optimism for the economy there is much less fear around COVID-19.

With fewer homes for sale and first time home buyers and owner occupiers (those buying a property to live in it) dominating the market, they are currently the ones driving up property prices the most. 

However as incentives like those from the HomeBuilder Grant and First Home Buyer Grant taper off it is expected that we will see a massive uptick in investor spending on property as they compete with owner occupiers and first home buyers over the super competitive interest rates.

It is predicted that Investors will drive the market well into 2022 and perhaps even 2023 depending on other conditions that influence interest rates like the cash rate.

How does the Cash Rate influence the Interest Rates on my loan?

You often hear about it in the news, the monthly changes in the Cash Rate, but what is the cash rate and how does it affect you?

In essence the Cash Rate which the RBA meets on to decide once a month (currently 0.15 per cent) changes how much money banks can lend to you.

So when the cash rate is extremely low - close to zero - as it is currently, banks can and are encouraged to offer lower interest rates. 

That means when the Cash Rate is low, Variable and Lock-In Interest Rates are low so your mortgage is cheaper! 

This can save you hundreds to thousands of dollars a year depending on the value of your home. 

With all that covered, every expert I talked to predicts that the cash rate will not decrease any time in the next 2 years and most experts expect the cash rate to increase in 2023 or later.

However three of the Big 4 banks have already started hiking interest rates across the range with Westpac the only one yet to start showing upward movement. It's a sign of the times with a number of other banking and loan institutions also increasing interest rates across a wide range of home loans.

How does the government affect property prices?

Legislation is also a factor that can have a sizable impact on property demand and prices.

Tax credits, deductions, and subsidies are some of the ways the government can boost demand for real estate for as long as they are in place.

Some recent examples of this include the HomeBuilder Grant and the First Home Buyers Grant.

Being aware of current government incentives can help you determine changes in supply and demand and who and what will be affecting property prices.

An example of something to look out for is the percentage of properties purchased by FHB's (First Home Buyers) soaring to record highs recently. Although this still remains the case, it wont forever and certainly is not predicted to last into 2022.

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Fidler, J. (2021, August 5). Economic guide: Forecasting property prices and what affects property in 2021, 2022 and beyond. Urban.