Press Release

Great Australian dream once again within first home buyer reach

25 Oct 2018
  • Lending to first home buyers has surged an astonishing 74 per cent in Sydney in the last 12 months, and almost 30 per cent across the rest of the country
  • Improved affordability and below average home loan rates set to provide further opportunities for first home buyers over the coming 12 months
  • Domestic and foreign investors will continue retreating in response to increased costs and tightening credit standards 
  • Sydney and Melbourne house and unit prices to continue falling in 2019 
  • Adelaide house price growth to be the strongest in the nation, with robust results also predicted for Brisbane, Canberra and Hobart
  • Regional centre outlook is positive
HOUSING prices across Australia are expected to grow in the next three years, with the exception of the two biggest markets of Sydney and Melbourne where they will continue falling in 2019, providing a 12-month window for first home buyers there to pursue the Great Australian Dream, according to a new report released today.
 
QBE’s Australian Housing Outlook 2018-2021 reveals that over the next three years house prices are set to rise in Adelaide by 12.4 per cent, in Brisbane by 11.3 per cent, Canberra by 10.4 per cent, Hobart by 7.9 per cent, Darwin by 6.0 per cent and Perth 5.0 per cent after several years of stagnant conditions. 
 
The primary drivers for a strengthening property market in these capital cities are affordability, increased demand and improving economic conditions. 
 
However, the story is different in the previously hot markets of Sydney and Melbourne.
 
In Sydney, house prices rose an extraordinary 84 per cent between 2012 and 2017, before falling 7.6 per cent in 2018. They are expected to fall a further 3.5 per cent in 2019, before bottoming in 2020 and rising by 2.3 per cent in 2021.
 
In Melbourne, house prices rose 69 per cent between 2012 and 2017, before falling 1.6 per cent this year. They are expected to fall a further 4.2 per cent in 2019, before rising slightly by 0.6 per cent in 2020 and strengthening by a further 1.2 per cent in 2021.
 
First home buyers
 
First home buyers have been surging back into the market, with lending to them at their highest level since 2010. This is expected to continue for the next 12-months at least.
 
Last year, lending to first home buyers grew an astounding 74 per cent in Sydney and almost 30 per cent across the rest of the country. 
 
Tighter lending standards for domestic investors and restrictions on international buyers are believed to be the primary drivers.
 
QBE Lenders’ Mortgage Insurance (LMI) CEO, Phil White, said the surge in first home owner lending proved the Great Australian Dream of home ownership was alive.
 
“We haven’t seen the first home buyer market this strong since the Australian Government’s 2008 stimulus plan following the Global Financial Crisis, which saw $1.5 billion allocated to first home buyers,” Mr White said. 
 
“The increases in the volume of first home buyers has been supported by improvements in affordability and first home buyer incentives. 
 
“Record low interest rates in recent years had seen a surge in investor lending, but this year’s report shows investor lending scaling back, which should also provide further room for first home buyers over the next couple of years.
 
“Lenders’ responses to regulatory restrictions have contributed to the softening of the market.  State government incentives have encouraged first home buyers to enter the market after several years of being pushed out by domestic and foreign investors.”
 
Outlook
 
Adelaide is forecast to see the strongest growth of any capital city in the country, continuing its steady growth trajectory, but outpacing all other capital cities over the next three years.
 
The outlook is less rosy for apartment owners, with unit prices set to fall in Brisbane by 5.1 per cent, Darwin by 4.5 per cent, Sydney by 3.1 per cent and Melbourne by 2.1 per cent. 
 
This is due to weaker demand from investors and an increase in supply of apartments. 
 
“We anticipate foreign investment will further dampen in coming years owing to a number of factors such as increased approval fees, stamp duty and land tax surcharges, as well as tighter capital controls from foreign governments, most notably China, which have impacted how much money they can take out of their country,” Mr White said.
 
Over the next three years, the overall housing market will be supported by strong population growth, with net overseas migration forecast to remain high in the long-term, averaging 220,000 per annum over three years to 2020-2021, significantly higher than the prior 20-year average of 183,000 per annum. 
 
This growth will underpin demand for new dwellings and help meet the high level of new supply coming online in some markets. 
 
A complete version of the report is available to download here: qbe.com/lmi/housingoutlook
State-by-state highlights of the QBE Housing Outlook 2018-2021

Sydney

  • Sydney’s house prices are expected to fall in the beginning forecast period and end up 1.2% lower to be at $1,090,000. 
  • The unit market is expected to fall even further for Sydney with a forecast drop of 3.1% to 2021 to reach $745,000. 
  • Affordability and first home buyer incentives are expected to continue to underpin first home buyer activity
  • After seeing the strongest price growth in the 12 months prior, Sydney’s inner and middle ring suburbs have seen the largest fall in prices over 2017/18 (falling by 8.1% and 10.6% respectively).
  • Outer Sydney saw a more moderate decline of 2.8% over the same period, which was likely supported by its relative affordability appealing to first home buyers.

Melbourne

  • Housing market prices to fall in Melbourne, with house prices expected to drop by 2.5% to $835,000 by June 2021. By means of comparison, Sydney house prices are expected to fall by 1.2% to June 2021.
  • Unit prices are also expected to decline 2.1% to $545,000 in Melbourne.
  • Continued population growth is expected to absorb some of the excess supply of units.
Brisbane
  • House price growth will continue and be 11.3% higher to $615,000 by June 2021. This is more growth than Canberra (10.4%), Hobart (7.9%), Darwin (6.0%) and Perth (5.0%). Only Adelaide (12.4%) is expected to outperform Brisbane house prices. 
  • Oversupply of units will continue to put downward pressure on rents and prices of units to decline by 5.1% to $405,000. This is the greatest expected decline of all capital cities. 
  • Greater competition for tenants of inner-city apartments is forecast to cause investors to lower rents to try to draw tenants from houses and more affordable city fringe locations. 

Perth

  • Overall, the Perth market is expected to be at or near the bottom with houses and units expected to experience some growth in price to June 2021. House price growth in Perth will beat Sydney and Melbourne but underperform compared to Adelaide, Brisbane, Canberra, Hobart and Darwin. 
  • Dwelling surplus in Perth looks set to remain in place for some time. 
  • The forecast median house price of $550,000 at June 2021 will represent cumulative growth of 5% over the next three years, with unit price forecast to rise 3.7% to $405,000.

Adelaide

  • Adelaide is expected to record similar house price growth as the last three years and is forecast to grow by 12.4 per cent over the next three years, the highest of any Australian capital city. 
  • Median unit prices are projected to rise by a slightly lower 6.3 per cent, making Adelaide the second strongest unit market after Hobart’s 9.3 per cent. 
  • These positive forecasts can be attributed to Adelaide’s ongoing market affordability, coupled with low interest rates, despite South Australia’s generally depressed conditions. 

Canberra

  • Growth in house prices forecast with median house price to increase 10.4% to reach $745,000. This is more than growth forecast for Sydney, Melbourne, Hobart, Darwin and Perth. 
  • Unit price is forecast to reach $465,000, a cumulative rise of 5.9% to 2021. 
  • Conditions in the house market in Canberra are expected to remain largely positive, driven by population growth, an undersupply of houses and strong employment prospects. 

Hobart

  • Hobart’s median house price forecast to rise to $520,000, reflecting growth of 7.9% to 2021.
  • Median unit price in Hobart forecast to reach $420,000 at June 2021; a cumulative rise of 9.3%. 
  • An undersupply of housing and better affordability relative to other capital cities is expected to continue to influence the property market
  • While all other states across the country saw declines in the value of investment loans, Tasmania’s strong capital gains in recent years meant it was the only state to see increased investor lending, of 9.7 per cent. 

Darwin

  • This trend is expected to recover with house prices forecast to grow 6.0 per cent over the next three years.  
  • Unit prices are expected to fall 4.5 per cent over the same period. 

State-by-state house price forecasts

2018-2021

Sydney

Melbourne

Brisbane

Perth

Adelaide

Canberra

Hobart

Darwin

Growth

-1.2%

-2.5%

11.3%

5.0%

12.4%

10.4%

7.9%

6.0%

Median house price

$1,090,000

$835,000

$615,000

$550,000

$555,000

$745,000

$520,000

$530,000
 

State by-state unit price forecasts

 

2018-2021

Sydney

Melbourne

Brisbane

Perth

Adelaide

Canberra

Hobart

Darwin

Growth

-3.1%

-2.1%

-5.1%

3.7%

6.3%

5.9%

9.3%

-4.5%

Median unit price

$745,000

$545,000

$405,000

$405,000

$400,000

$465,000

$420,000

$365,000
 

 

About the QBE Australian Housing Outlook Report 2018-2021

In its 17th year, the QBE-commissioned BIS Oxford Economics report, is an annual overview of the Australian housing market focussing on supply, demand and price forecasts for the next three years to 2021.The “unit” market refers to all forms of multi-unit dwellings including townhouses, villa units, semi-detached dwellings, terraces, flats and apartments. The “house” market refers to detached or separate dwellings that do not share a wall with adjoining dwellings.

House and unit price forecasts in this document are weighted median prices, which are stratified by location, i.e. the median, or mid-point, is considered a better indicative measure of prices than average, which can be more influenced by extreme results. The weighted median also considers any influence that changes to the composition of sales may have on the median. Affordability forecasts are based upon mortgage repayment on 75 per cent of median house price as a proportion of average household disposable income.

Media enquiries:

Apollo Communications
Georgina Hall 
0420 571 720 ghall@apollo.sydney