$3m average house price could soon be a reality

The property market is slowing, but in many cases Aussies home prices are crash-proof. Here’s why the real estate boom is never really over.

ANALYSIS

The real estate boom is over!

That was the bold headline this week in a news article referencing a recent KPMG report.

So what happens next?

Will homeowners be selling up and heading for the hills as the market crashes? While buyers rub their hands together as property suddenly becomes affordable?

No.

Because in this case, the end of a boom means price growth of 5.3 per cent over the next six months, followed by 5.6 per cent further growth in 2025, according to the KPMG Residential Property Market Outlook June 2024.

Not price falls … price growth.

So why is the boom over, you might ask? Because that growth level is down on the 7.7 per cent national rise over the past 12 months.

In Sydney, for example, Australia’s least affordable property market, prices are expected to rise 4.9 per cent for the rest of this year and then 5.3 per cent next year.

Sydney is one of the world’s least affordable housing markets. News Photo – Getty Images

Sure, it’s slower than the 7.2 per cent average annual growth rate that SQM Research has recorded over the past 10 years, but this will be small comfort for buyers.

It will just mean the properties they can’t afford now will be 10 per cent more unaffordable in 18 months’ time.

WHAT’S IN STORE FOR AUSSIE RENTERS?

And what about for renters?

KPMG expects rents to rise by up to 5 per cent nationally over the next two years, which is slower than the 7.8 per cent increase of the past year, but certainly nothing to celebrate if you ask the thousands of people queuing each week outside of rentals that 1990s backpackers and stoners would turn their noses up at, while they struggle to get a lease.

Especially when you consider that these years of single-digit growth come on the back of repeat years of 25 per cent plus increases in rent.

Long Iines at a rental inspection in Surry Hills. Picture: Sam Ruttyn

HOME PRICES ARE HEARTBREAKING, REALLY

Aussie property prices are like Heartbreak Hill. They just keep going up. And even when you get to a flat part at the top, you head around the corner and there’s another incline.

And with the population growing and construction nowhere near where it needs to be, we’re looking at more of the same for the foreseeable future.

The thing about ‘booms’ when it comes to modern day real estate, is that they’re not really booms. Otherwise, we’d be having booms every three or four years in Sydney if the last decade is anything to go off. They’re growth cycles.

And growth cycles, by their very name and nature, don’t finish until the market stops growing.

So when an asset has double-digit projected growth over the next 18 months, it doesn’t mean the boom is over. It means the capability of property values to grow, in the face of a cost of living crisis, sticky inflation and a record breaking cycle of interest rate rises, is nothing short of remarkable.

Nobody you talk to at a BBQ can afford to buy anything, anywhere. But prices keep going up.

How did these two manage to buy? Picture: iStock

Sydney’s median house price is now a national record of $1.4 million according to PropTrack data. And if you think values will go down, consider that in 2013, we did a news story about Sydney’s median hitting $600,000. In 2014, it hit $700,000.

There is nothing in the underlying market forces to suggest prices won’t double again in the next 10 years. Before you know it, $3 million will be the norm and we will yearn for the days when $1.4 million could get you a house. I wonder how many more ‘booms’ we’ll have between now and then.

Originally published as $3m average house price could soon be a reality