Aussie housing market set for ‘steady recovery’

Oksana Patron

22 June 2023

The Australian housing market is now well-positioned for record highs amid steady recovery, with house prices in Sydney, Adelaide and Perth expected to fully recover from the 2022 downturn, according to Domain’s Forecast Report for the 2023-24 financial year.

At the same time, the study has forecast a full recovery from a last year’s downturn for unit prices in Brisbane, Adelaide and Hobart by the end of the next financial year.

Regional Australia is also set to see a return to ‘more traditional price patterns’ although a slower pace of growth will be anticipated compared to the combined capital cities.

Nicola Powell, Domain’s Chief of Research and Economics, said that the Australian housing market has experienced both upward and downward price pressures and the prices across the capital cities were supported by a population growth, housing construction headwinds, supply and borrowing power.

“Population pressures will lead the charge in factors driving housing demand and property prices higher over the next 12 months. Australia has seen an exponential increase in temporary and permanent migration since the international border reopened in late 2021 to alleviate skills shortages. Of course, unlike natural population growth, those arriving from overseas aren’t already housed,” she said.

“This puts us in a position where in the next financial year alone, nearly 130,000 extra dwellings will be needed, with the Eastern Seaboard receiving the largest share of migrants.

“When you combine this with unprecedented headwinds in the construction industry and unseasonably weak listings, this has contributed to a forecast of continued tight housing supply that drives up market competition.”

When it comes to regional areas, house and unit prices are expected to increase modestly over the coming financial year, with house prices expected to outperform units, and the overall modest growth attributed to a revert to historical movements that showed less growth in regional areas than in cities.

Domain’s report highlighted that in the past, migration policy pushed migrants towards regional areas with migrants willing to live in regional areas as they were awarded extra points and have an increased chance of getting a permanent visa.

Following this, with the anticipated overhaul of the migration system, there is speculation that the streamlined channels of overseas migration to regional locations may be overturned – helping to dissipate demand flows.

“That being said, with housing affordability remaining a significant barrier in our largest capital cities, demand will likely remain from younger home buyers who seek affordable regional markets, particularly those within close proximity to a major city or employment hub.”