Australian Home Prices Poised for Moderate Growth Amid Affordability Concerns

Highlights:

• Moderate Price Growth: Australian home prices are expected to rise 5–6% over the next two years, supported by lower borrowing costs.
• Capital City Outlook: Prices in major cities – Sydney, Melbourne, Adelaide, Brisbane, and Perth – are forecast to grow 4–7% this year and next.
• Affordability Challenges: Rising home values, with the national median reaching $848,858 in August, continue to strain first-time buyers despite modest improvements in purchasing power.

Steady Price Gains Forecast

Australia’s housing market is expected to see moderate price growth over the next two years, with home values projected to rise around 5–6%, according to a Reuters poll of property analysts. At the time of writing, analysts suggest that lower borrowing costs are likely to support home sales, though ongoing affordability pressures could limit larger gains.

Capital City Outlook

The Reuters poll, conducted from 18 August to 8 September, surveyed 15 property experts who forecast home prices in major capitals – Sydney, Melbourne, Adelaide, Brisbane, and Perth – to increase between 4% and 7% over this year and the next. This represents a slight upward revision from previous quarters, with expectations rising from 3.7% in Q1 and 4% in Q2 to 5% currently.

Despite this growth being modest compared with past housing booms, it may further challenge first-time buyers trying to enter Australia’s already expensive property market, where the median home price is nearly eight times the average annual income.

Affordability and Market Dynamics

The national median home price increased roughly 4%, from $814,293 in January to $848,858 in August, according to property consultancy Cotality. Analysts noted that affordability remains a key concern: in a follow-up poll question, five experts anticipated slight improvements in purchasing power over the next 12 months, while four expected affordability to worsen.

While moderate price growth may provide some stimulus for sellers, it also highlights the ongoing tension between affordability and market dynamics in Australia’s residential property sector.

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