Aussie state capital to see huge $216,000 increase in house prices

Across Australia, the average house price is expected to see massive increases by the end of the year, with one city facing huge rises.

In grim news for first home buyers, the average Sydney house price is predicted to skyrocket by $216,000 this year alone.

Across Australia’s five capital cities, the average home values have already increased by 10 per cent between January and May, according to CoreLogic figures.

Yet a group of 40 experts and economists believe further price hikes are still to come with Sydney and Perth expected to see the biggest gains.

Economists are forecasting an 8 per cent increase in property values over the next seven months, according to the survey run by comparison website Finder.

Applying this forecast to the current price hikes means Sydney prices would increase by an unprecedented 21 per cent this year, adding $216,300 in value to the average Sydney property, it found.

Graham Cooke, head of consumer research at Finder, said the Sydney property market was continuing to reach unprecedented levels.

“The current average salary is around $92,034, so if our experts’ predictions are correct, the average Sydney homeowner will earn more than double the annual wage this year – equivalent to a fifth of the average property value through 2021,” he said.

“To put that into perspective, prices rose by just 4 per cent in 2020 and 2019, and dropped by 8 per cent in 2018. A 21 per cent increase would be the highest annual increase for the Sydney property market in recent history, beating the previous record of a 15 per cent rise in 2013.”

This would result in the average price of a Sydney property to hit $1.24 million by December.

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Sydney continues to lead Australia when it comes to skyrocketing house prices. Picture: Gaye Gerard/NCA NewsWire

Experts predicted a 7 per cent increase in house prices in Melbourne between June and December, causing values to rise by $120,000, with the average house price at the end of the year estimated to be $926,000.

Brisbane was also expected to see 7 per cent gains, adding more than $98,000 to the value of properties and bringing them to an average value of $679,000.

In Perth, property prices were predicted to rise by 8 per cent, adding almost $80,000 to the value of properties, giving them an average value of $609,000, while Adelaide’s estimated 6 per cent rise would add more than $66,000 on the value of properties.

Single parent deposit scheme ‘too risky’

Meanwhile, more than two-thirds of experts believe the federal government’s recently introduced Family Home Guarantee – where single parents can buy a home with as little as a 2 per cent deposit – was “too risky” and may put vulnerable borrowers in a bad situation.

Leading independent economist Saul Eslake said there were dangers to individual borrowers, the financial system and the broader economy when encouraging people into homeownership with wafer-thin equity.

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Melbourne house prices are predicted to rise by $120,000 as economists express concern about the new federal government initiative to help single parents buy a house. Picture: Daniel Pockett/NCA NewsWire

Mr Cooke also agrees the lending scheme is risky.

“Encouraging homeowners to get into the property market with only a 2 per cent deposit reminds me of the 100 per cent loans being offered in Ireland in the months before the GFC,” he explained.

“With such a small slice of equity in your home, any potential buyers would be very susceptible to falling into negative equity if prices did fall.”

Interest rates

All 40 participants that took part in Finder’s RBA Cash Rate survey agreed the cash rate will see no movement on Tuesday.

While 9 per cent believed an increase could be imminent this year, the majority weren’t expecting interest rates to rise until 2023 or later.

Mr Cooke said mortgage holders should remain vigilant, despite stagnant rates.

“Rates may be set to sit still, but that doesn’t mean your actual home loan won’t become more expensive,” he said.

“We’ve already seen Westpac, CBA and UBank raise rates independent of the cash rate in recent times. Now would be a great time to find out what rate you’re actually paying. If it’s over 2 per cent, you might be able to save significantly by refinancing to a better deal.”