Sydney, Brisbane, Melbourne house prices: 22% national rise predicted

An incredible surge across Australia’s capital cities has forced experts to scrap their initial predictions for rising house prices.

If you’re a Sydneysider looking to put money down for a house (or a dilapidated shack) anytime soon, you might want to click out of this article now to save you a migraine.

Earlier this month, prospective home buyers were hit with a startling new statistic: median house prices in Sydney had risen $300,000 this year, bringing the citywide average house price to $1.3 million for the first time.

The Australian housing market soared 17.6 per cent over the first nine months of 2021, with the nation’s annual growth accelerating at rates not seen since June 1989.

New statistics from Oceania property database CoreLogic revealed the national home value index rose by another 1.5 per cent in September alone, putting Sydney comfortably inside the world’s top three list of most unaffordable cities for real estate.

Now, that number is set to rise even further before the end of the year.

Experts at Westpac have now revised their market forecast for the Harbour City after prices exceeded their initial predictions of 22 per cent rise for 2021.

Sydney home values have already surpassed the bank’s previous forecast by 1 per cent this month, forcing economists like Bill Evans and Matthew Hassan to re-evaluate.

New models now suggest the Sydney dwelling prices could rise by 27 per cent by the end of the year as markets continue to outperform expectations.

Markets across Australia have continued to outperform expectations despite lockdowns and high unemployment rates.

The new milestone puts the average Sydney house price over 14 times higher than the nation’s average full-time salary ($90,300). In comparison, wages in Australia have grown by just 1.7 per cent in 2021.

Of course, it’s not just Sydney copping the heat of rising house prices. Real estate markets have soared across Australia’s capital cities in 2021, despite lengthy lockdowns and rising unemployment levels.

“Prices have continued to post strong gains despite recent extended lockdowns in NSW, Victoria and the ACT,” the economists wrote.

“Even in the most heavily affected markets of Sydney, Melbourne and Canberra, price growth has sustained a strong double-digit annual pace.”

Westpac expects Melbourne prices to rise by 18 per cent – 2 per cent higher than the bank’s previous forecasts for the Victorian capital. Brisbane home values, on the other hand, have been predicted to rise by 22 per cent. Perth by 15 per cent, Adelaide by 18 per cent.

Hobart’s real estate has also been tipped to rise by a whopping 25 per cent.

Sydney’s real estate market is predicted ease to a 6 per cent growth next year, which is still 2 per cent points higher than Westpac’s previous diagnosis.

“With reopening in sight, dampening effects of lockdowns will now drop out of the picture,” the economists continued.

“We expect reopening boosts to more than offset any initial drags from recently announced macro-prudential measures.

Sydney’s median house price rose by over $300,000 this year. Initial predictions of a 22 per cent rise for the year have been scrapped.

“We still expect momentum to slow considerably through 2022 as stretched affordability combines with macro-prudential tightening measures and, later in the year, the anticipation that the Reserve Bank will begin a tightening cycle in early 2023 begins to weigh on confidence.”

However, Westpac predicts the national real estate market to rise just eight per cent next year, following a decision by the Australian Prudential Regulation Authority decision last week.

The Guardian reported the banking watchdog requested banks assessed new homebuyers’ ability to repay loans at an interest rate of at least three percentage points above the rate they are applying for.

Westpac expects the “incremental” tightening in policy to curb credit growth from early next year and beyond.

“As we move into 2023, the impact of the RBA’s tightening cycle will weigh more heavily on housing markets as borrowing capacity is impacted directly and as sentiment turns,” Evans and Hassan said.

Sydney's house prices have again exceeded expectations, with economists now predicting a 27 per cent rise for the whole of 2021.

A recent survey by Finder.com.au found a majority of polled economists expected the big four banks to lift their standard lending rates out of cycle with the Reserve Bank within the next 12 months.

“The slowdown in first home buyers can be seen in the lending data, where the number of owner occupier first homebuyer loans has fallen by -20.5% between January and July,” Mr Lawless continued.

“Over the same period, the number of first home buyers taking out an investment housing loan has increased, albeit from a low base, by 45%, suggesting more first home buyers are choosing to ‘rent vest’ as a way of getting their foot in the door.”

On a global scale, only Hong Kong and Vancouver have higher costs of living, according to the Demographia Housing Affordability Ratings. Sydney (third) and Melbourne (fifth) are the only two Aussie cities on the list, with New Zealand’s Auckland placing fourth in front of Toronto.

Cities with a price-to-income ratio of more than 5.1 are considered “severely unaffordable”.

Hong Kong recorded a staggering price-to-income ratio of 20.7, over seven points higher than Vancouver‘s 13.

Adelaide came in as the world’s 13th most unaffordable city with a debt-to-income ratio of 7.7. Brisbane placed 18th 6.6, with Perth ranking 23rd with a debt-to-income ratio of 6.

Originally published as Sydney, Brisbane, Melbourne house prices: 22% national rise predicted