Press Release

Capital city house prices forecast to rise as new home completions fall


House prices across all capital cities are expected to stabilise over the coming year, before strong population growth and a sharp downturn in new dwelling completions results in prices increasing, according to research released by QBE today.

QBE’s Australian Housing Outlook 2019-2022 report says after experiencing slowing growth or declines in the past two years, easing lending restrictions, Commonwealth and state tax concessions and lower interest rates are expected to encourage borrowers back into the market – providing some positive impetus to property prices.

The strongest forecast is for Brisbane, where a decade of modest price increases has left the market relatively affordable. While the worst appears to have passed for the Sydney and Melbourne markets, the report’s forecasts suggest the upside over the next three years remains limited. 

QBE Lenders’ Mortgage Insurance (LMI) CEO, Phil White, said growing supply and demand imbalance is likely to be a powerful factor for some markets.

“As well as lower interest rates, and expectations that these will remain low for some time, Government incentives and an easing of lending restrictions, our report suggests that a drop off in construction completions is likely to drive prices higher over the next few years.

“Building approvals fell by 19% in 2018/19 and completions are forecast to fall to 163,500 dwellings by 2020/21 (down 22% from the average over the past five years). With population growth expected to remain strong, that’s well below underlying demand. This could mean some previously oversupplied markets will tip back into undersupply by 2021/22. With other factors also stimulating the economy and by association the housing market, there is potential for a recovery in prices.

“All capital cities have seen an increase in the level of apartments being built. This is likely to create pressure on two fronts. Firstly, higher density buildings take almost three times longer than houses to reach the market. And secondly, owner-occupiers typically prefer ready-to-move-into properties. 

“This discrepancy between current demand and the timing of future supply is likely to result in greater volatility and upward pressure on property prices.

“Given these factors, the report’s forecasts for the Sydney market may be on the conservative side and we would expect that pockets of this market could see sharper price increases sooner. 

“At the same time, while forecasts for the Brisbane house market point to solid growth, and the fundamentals do look very strong, there is a risk that consumer caution and oversupply of units could temper these projections.”  

NATIONAL OUTLOOK

Sydney 

  • House prices are estimated to be at, or close to, bottom in 2019 with the median house price forecast to rise to $995,000 (+1.2%) in the year to June 2020.
  • Median house prices in Sydney have not been below the million-dollar mark since Mar-15.
  • Sydney median house price is forecast to rise a cumulative 6% in the next three years, taking the median to $1,040,000 by June 2022 (equivalent to Jun-16 levels).
  • Despite the rise, house prices are forecast to remain below the June 2017 peak.
  • With the unit market more exposed to demand from investors, a further 3% median unit price decline is forecast for 2019/20 before prices show signs of recovering from 2020/21. 
  • Sydney’s median unit price is expected to reach back up to $720,000 by June 2022 — on par with the June 2019 level.

Melbourne

  • House price growth in 2019/20 is expected to be hampered by the rise in dwelling completions and an uptick in vacancy rates. 
  • Melbourne’s median house price is projected to rise by a total of 5% over three years to $810,000 as at June 2022 (equivalent to Dec-16 levels).
  • Melbourne’s median unit price is expected to remain flat over 2019/20 before the supply of recently completed unit stock is absorbed. 
  • Over the forecast period it is projected the median unit price growth will increase by an aggregate 4% to reach $570,000 by June 2022.

Brisbane 

  • After a modest rise in 2019/20, median house price growth is forecast to accelerate from 2020/21. 
  • In aggregate, median house price growth is forecast to average 6.4% per annum over the next three years, taking the median house price to $660,000 in June 2022.
  • Challenges will remain for the Brisbane unit market given the weakened lending environment for investors and the excess supply of units. A 2% decline in the median unit price in 2019/20 is expected. 
  • Modest price growth is expected to return through 2020/21 and 2021/22, with Brisbane’s median unit price forecast to rise by a total of 3% in the next three years to $435,000 by June 2022. 

Perth 

  • Signs point to the worst being over for the Perth house market with growth expected to emerge in 2020/21 and 2021/22.
  • By June 2022, the median house price is expected to reach $550,000 (6% higher than June 2019 levels).
  • Weaker investor demand will continue to be felt in the unit market, with median unit price growth forecast to be marginally lower than that of detached houses.
  • After a marginal decline in 2019/20, a limited rise is forecast for 2020/21 before unit price growth picks up to take the median unit price to $380,000 by June 2022, or a 5% increase on June 2019 levels.

Adelaide 

  • Moderate fundamentals of the Adelaide house market are expected to also lead to some price growth, averaging 4.1% per annum in the next three years.
  • Median house price expected to grow to $550,000 by June 2022. 
  • The greater level of unit construction in recent years is expected to mean more modest price growth than for detached dwellings. 
  • It is projected that the median unit price will grow by a lower 1.5% per annum over the three years to June 2022.

Canberra

  • The re-introduction of stamp duty concessions for first home buyers in the Australian Capital Territory from July 2019 is predicted to facilitate further demand at the more affordable end of the market.
  • Canberra’s house prices are forecast to rise by an aggregate 6% in the three years to June 2022, taking the city median to $750,000.
  • Unit completions are forecast to begin to ease after peaking in 2019/20.
  • High level of unit activity will weigh on price growth, with forecasts of a 7% growth in the next three years, taking the median unit price to $480,000 at June 2022.

Hobart

  • Hobart house prices are considerably more expensive than other regions of Tasmania. Consequently, Hobart’s median house price is expected to show only limited rises over the next three years, rising by a total 4% to $520,000 by June 2022.
  • A tight vacancy rate and undersupply in the unit market is expected to cause some flow on demand from the housing market into the unit market. The median unit price is forecast to rise by 3% over the three years to June 2022 to reach $420,000.

Darwin 

  • New house supply is expected to fall further in 2019/20.
  • A total rise in Darwin’s median house price of 7% is forecast in the three years to June 2022. 
  • Unit price growth is forecast to return from 2019/20, with the median unit price forecast to climb by 9% to $355,000 by June 2022.

Regional NSW

  • Wollongong median house prices to rise 6% over the next three years to $685,000.
  • Newcastle median house prices to rise 11% to new high of $630,000 by 2022.

Regional VIC

  • Geelong median house price to rise 4% to $540,000 by 2022.
  • Ballarat median house price to rise 8% to $425,000 by 2022.
  • Bendigo median house price to rise 7% to $395,000 by 2022

Regional QLD

  • Gold Coast house prices to rise 2.9% p.a. ($680,000 by 2022); units up 0.8% p.a. to $435,000 by 2022.
  • Sunshine Coast median house price to grow 7% to $635,000 by 2022.
  • Toowoomba median house price to average 2.5% p.a. growth over the next three years ($415,000 by 2022).
  • Townsville median house price is forecast to rise 10% to $345,000 by 2022.
  • Cairns median house price to rise 8% to $440,000 by 2022.

Download a full copy of the QBE Australian Housing Outlook 2019-2022

In its 18th year, the QBE-commissioned BIS Oxford Economics report provides an analysis and forecast of the key drivers influencing the residential housing market nationally, as well as across each of Australia’s state and territory capital cities and selected regional centres. The analysis presents an outlook for the performance of the residential market, as measured by historical and forecast movement in the median house price and median unit price. 

About QBE LMI

Lenders’ Mortgage Insurance (LMI) provides lenders with a way to accept a smaller deposit from borrowers. By reducing the deposit required, borrowers may be able to purchase a home much earlier, or buy a better located or better-quality property than your deposit would otherwise have allowed. For more information visit https://www.qbe.com/lmi


For more information:
Paul Dekkers
External Communications Manager
QBE Australia Pacific
Phone: +61 418 218 722
Email: paul.dekkers@qbe.com