Home prices will rise by up to 5 per cent in this half, says PropTrack

PropTrack is bullish about the prospects of a home price recovery even if the market must absorb a wave of stock later this year.

Across capital cities, the volume of total stock for sale remains historically low.

National property prices will increase by between 2 per cent and 5 per cent by the end of the year and capitals would rise even faster, according to research house PropTrack.

The group has joined the ranks of bullish housing market forecasters as more economists expect home prices will take off in the wake of a pause in interest rate increases.

However, some players expect that listings could be partly fuelled by a rise in distressed sales and as investors exit in the face of tougher lending conditions.

PropTrack’s upbeat outlook is founded on the 2.3 per cent increase in property prices over the first six months of this year.

Home prices are forecast to increase between 3 per cent to 6 per cent across capital cities, with all cities except Hobart and Darwin expected to see positive price growth over the remainder of the year. The Tasmania capital is forecast to dip by 3 to 6 per cent and Darwin to fall by up to 3 per cent.

The strongest growth is expected in Perth (4 to 7 per cent), Sydney and Adelaide (both recording a 3 to 6 per cent lift), and Brisbane by 1 to 4 per cent.

But Melbourne is forecast to range between a 1 per cent fall and a 2 per cent gain, and Canberra to lift by up to 3 per cent, as they recover more slowly than other capitals.

PropTrack’s forecast is premised on the Reserve Bank nearing the peak of the rate rising cycle, although the strict relationship between rates and housing has broken down. The analyst said the direction of the housing market was likely to be influenced by the volume of stock available for sale.

PropTrack director of economic research and report author Cameron Kusher.

“The property market has seen a turnaround this year with six consecutive months of property price growth. Limited supply of available properties for sale was a key factor contributing to buyer competition and price growth,” PropTrack director of economic research and report author Cameron Kusher said.

National property prices lifted 2.3 per cent over the first six months this year, reversing the hit taken over the prior six months. Prices rose despite lower borrowing capacities, and now the analyst anticipates moderate price increases over coming months.

“We expect property prices to increase by up to 5 per cent ­nationally over the remainder of 2023, with greater growth projected in the larger capital cities,” Mr Kusher said.

The longer-term picture is clouded, but the analyst forecasts modest price growth next year.

Mr Kusher said that next year a large cohort of fixed-rate borrowers’ mortgages were set to expire from current interest rates of about 2 per cent and reset to about 6 per cent.

“Interest rate changes act with a lag, and as such the possible impact of higher repayments on these borrowers won’t be seen until 2024,” he said.

Across capital cities, the volume of total stock for sale remains historically low, with the total number of properties listed for sale on realestate.com.au down 9.6 per cent year-on-year in June. This ongoing low supply of properties available for sale has contributed to the price ­rebound.

But there are now some signs that vendors are increasingly prepared to list, with a stock surge expected to temper price increases.

AMP in May revised up its national home price forecasts to flat or up slightly for this year, and expects a 5 per cent gain next year.

AMP chief economist Shane Oliver has a “base case” that home prices have bottomed, but this week noted that the risk of ­another leg down, as the full lagged impact of interest rate increases on the property market and unemployment materialises, was very high.

Morgan Stanley’s strategy team also said this week that house prices had been supported by the very tight supply environment, with total listings falling to 2010 levels and rental vacancies below 1 per cent in most major cities. But it said conditions were now easing.

“This improving supply dynamic, alongside continued worsening in affordability from further mortgage rate increases and a softer labour market, means we expect price momentum to continue to slow, with ­declines expected to resume over the second half of 2023,” the Morgan Stanley team said.