Forecast: 20% growth in 20 months a young buyer nightmare

Hobart’s first-time buyers will be all but locked out of the housing market if this prediction comes true. How expensive will your suburb be>>

FIRST-TIME house buyers will find themselves priced out of 86 per cent of greater Hobart suburbs if a bold market forecast is correct.

And it’s predicted to happen sooner rather than later.

The latest report from KPMG has forecast a surge in housing prices next year and in 2025, led by Hobart with 6 per cent growth by June 2024, followed by a further 14.2 per cent by June 2025.

Adding 20.2 per cent to greater Hobart’s median house price, per PropTrack figures, would push nine suburbs out of reach for first-home buyers (FHB) hoping to take advantage of property transfer duty concessions or the government’s MyHome scheme, which are capped at $600,000.

Areas that are currently under the cap with median house prices between $498,242 to $599,777 — Chigwell, Rokeby, Claremont, Glenorchy, Berriedale, Mornington, Lutana, Brighton and Moonah — would be out of reach for young buyers.

FHB would be restricted to houses in just six suburbs, Gagebrook, Clarendon Vale, Bridgewater, New Norfolk, Risdon Vale and Primrose Sands.

Hobart’s cheapest suburb, Gagebrook, would add almost $80,000 to its current median house price if 20.2 per cent growth comes to fruition.

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No.4 Lamont Pl, Gagebrook is priced at $435,000-plus, it is listed with LJ Hooker Pinnacle Property.

No.38 Mockridge Rd, Clarendon Vale is priced at $410,000-plus, it is listed with Harcourts Signature.

At the top end of the market, Sandy Bay houses would climb by $206,000.

Eight suburbs that currently have a six-figure median house price would push past the $1m median house price marker, including Bellerive, growing from $847,658 currently to $1.026m by mid-2015.

KPMG chief economist Brendan Rynne says despite high interest rates, constrained supply will likely dominate the factors influencing property prices in the short term, and result in price gains.

Dr Rynne said there were several factors “pushing the other way”, including mortgage stress, the number of borrowers coming off fixed rates, and the loan-to-income ratio for first home buyers who need about 50 per cent of income to pay their home loan.

“But on balance the factors pushing prices up will more than counter those restraining them,” he said.

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Brendan Rynne is chief economist at KPMG Australia.

LJ Hooker Pinnacle Property partner Alison Rogers said while forecasts are not a certainty, ANZ has also forecast housing price growth.

Mrs Rogers said a 20 per cent increase in prices would be a nightmare for young buyers.

“We already have FHB having to buy in lower socio-economic areas. There is not a lot of choice,” she said.

“More young people might choose to rent or stay at home with mum and dad.”

LJ Hooker Pinnacle Property partner Alison Rogers.

This West Hobart home sold in three days on the market.

Mrs Rogers said there had been a number of indicators of late that show a change in the Hobart market.

“In the last six weeks, we have noticed an increase in the number of buyers in the market, price levels, increasing stock levels, and a downward trend in the time it takes to sell,” she said.

“Demand in Hobart never really went away, people were simply spooked by rate rises.

“I just sold a home in Forest Rd, West Hobart for $200,000 more than it sold for in 2021, and it was unchanged,” she said.

“It sold in three days, under competition, and before its open home.”

Dr Rynne said with projections of house price growth ahead, governments would need to review their support programs for first-home buyers and others facing affordability constraints.

“What we suggest is that state governments need to review the first-home buyer cap or value cap regularly, such as every three years, to readjust it to reflect the real purchasing power of first-home buyers,” Dr Rynne said.

“But the much better long term solution is that you actually need planning reform. Inner and middle ring suburbs need planning reform that allows for an increase of density in housing stock in all main capital cities.

“What we need to be doing is allowing higher density residential, not multistorey residential towers, but an increase in the number of townhouses you see. Instead of one dwelling on 600sq m, have three dwellings instead.”

No.6 Ferry Street, New Norfolk is listed with Petrusma Property at $675,000-plus.

No.14 Waymouth Ave, Sandy Bay is listed with Knight Frank at $1.395m-plus.

Meanwhile, PropTrack’s mid-year Outlook Report forecast a 1-4 per cent decline in Hobart home prices by the end of next year.

PropTrack data also shows that while most other city market annual growth figures have been positive this year, Hobart is lagging behind with a 3.83 per cent decline.

Hobart has also had the largest change from peak pricing, a 6.6 per cent decline, September data shows.