CBA predicts house prices to rise by 5% to record levels this year

Australian house prices are set to reach record heights this year, according to the biggest bank in the country.

Australian house prices are set to reach record heights this year, according to the biggest bank in the country.

On Thursday, Belinda Moore, a senior economist at the Commonwealth Bank of Australia (CBA), forecast that the value of houses will jump by five per cent over the next 12 months.

“Overall, we expect a lift in home prices of five per cent in 2024,” she said.

“But more modest price gains until an easing in interest rates from the RBA later in 2024 (our base case in September 2024 for the first cut).

“We do expect considerable divergence between capital cities.”

Ms Moore made the prediction off the back of data that shows a strong start to the property sector for 2024.

Property data analysis firm CoreLogic found that for the month of January, national house prices jumped by 0.4 per cent.

The CBA says that the small housing stock is pushing up rents, and is thereby also pushing up property prices.

Australia’s largest commercial bank made the prediction. Picture: NCA NewsWire / Morgan Sette

This is the second piece of good news for homeowners in as many days.

On Wednesday, news.com.au reported that it appears unlikely Australia’s central bank will hike the interest rate at its first meeting of the year, being held next week, as inflation has dropped to a manageable level.

The inflation figure for the three months to December 31 came in at 4.1 per cent, compared to the RBA’s forecast of 4.5 per cent and market expectations of 4.3 per cent.

This compares to inflation of 5.4 per cent in the September quarter.

As a result, economists think that homeowners won’t be slammed with another rate rise just yet.

Other economists disagree with Ms Moore’s prediction that the rate will start to be cut in September this year.

Some economists suggest the first rate cut won’t come until November with others forecasting that mortgage stressed homeowners may need to hold on until 2025 before relief is delivered.

Meanwhile, Westpac has also thrown its weight behind a September rate cut.

NAB thinks homeowners will have to wait until November for some welcome relief while ANZ is predicting an even longer wait, not until December 2024.

House prices surged nationally by 25 per cent in 2021, and have enjoyed more modest gains since then. Picture: NCA NewsWire / Max Mason-Hubers

Despite five interest rate hikes by the Reserve Bank in 2023, house prices rose another 5.52 per cent last year, further pushing the Australian dream out of reach for ordinary workers.

Ms Moore’s latest prediction could spell disaster for new entrants into the property ladder, especially amid a shortage in housing and skyrocketing rentals.

At the same time the country faces a rental crisis, with record low capital city vacancy rates of around one per cent and tenants copping rent increases as high as 50 per cent.

For those not already on the property ladder, the prospect of house prices rising steadily again for another year is one more obstacle in their attempts to become homeowners.

— With Michelle Bowes and Frank Chung