House prices tipped to reach new highs by January: PropTrack

Property prices have risen for the first five months of the year despite interest rate rises and are on track to hit a new high sooner than you might think.

Close-to-peak interest rates and limited buyer choice has created an unexpected chain of events that could see house prices reach a new record high as early as January.

Home prices are on track to report annual growth over the latest financial year after markets nationally showed signs of steady gains through the first five months of 2023, according to housing data firm PropTrack.

After 10 months of declines to a low in December, housing costs have clawed back 1.55 per cent and are now just 2.6 per cent below their peak of the pandemic boom.

Should the market continue to move at its current pace, underpinned by tight conditions, PropTrack senior economist Eleanor Creagh said growth would be widespread and reach new highs next year. Given that limited new stock is coming to market, buyer interest is being concentrated, which is underpinning home prices and offsetting the downward pressure from interest rate rises, Ms Creagh said.

“If the pace of price growth recorded over the past quarter continues, national property prices will surpass their prior peak by January 2024,” she said.

“Population growth, tight rental market conditions and a housing shortfall are also expected to remain. If stronger demand holds up against the expected slowing of the economy, most capital city markets would return to positive annual price growth in the coming months.”

Several major banks and economists have been forced to revise their expectations around house prices in recent months as it became increasingly unlikely that falls of 15 to 20 per cent from the top to the bottom of the market were unlikely.

Sydney has rebounded the quickest this year, up 3 per cent, despite being the country’s most expensive market and therefore showing greater exposure to the interest rate hikes of the past 15 months. After hitting a low in November 2022, prices could hit new highs in December 2023.

A rapid 2 per cent turnaround has also been seen in Brisbane this year, with the city on track to report positive annual growth by July 2023, and beat its prior peak by September.

At the current trajectory, Canberra could surpass its peak in late 2024, Darwin in early 2025 and Hobart in 2030.

Adelaide and Perth have remained at peak for several months and are likely to continue moving higher.

However, some challenges may hamper growth in the coming months, particularly if stronger market conditions improve seller confidence and spark a rise in stock coming to market.

“Interest rates also rose again in June and may rise further, which could slow the recovery. Though interest rates are closer to their peak than not, and the shock of rate rises has lessened,” said Ms Creagh.

SQM Research warned on Tuesday that the property market could face a “double-dip downturn”, with prices heading south in the near future, if the number of homeowners being forced to sell under “distressed” conditions starts to rise alongside the unemployment rate.