Sydney could be ripe for another boom in 2020, with property values tipped to rise by 10% bringing the median house price to $1.25 million. It's currently sitting around the $1.14 million mark.
That's according to Domain's Property Price Report Forecasts, released today.
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The forecast predicts Sydney's house price growth to be the strongest in the country, followed by Melbourne and Brisbane with an expected 8% growth this year.
Nationally, house prices are expected to grow by 8% this year and unit prices to rise by 6%. Price growth is forecast to moderate in 2021 due to "stable interest rates" and "affordability constraints" as well as a pick-up in housing construction and more new listings, which is expected to limit further price growth.
The report says that very low interest rates and the expectation they will remain low will be the "key drivers" behind rising property prices this year.
Along with record low interest rates, strong population growth, a slowdown in new housing construction, low levels of listings, and the First Home Loan Deposit Scheme could also contribute to rising prices as buyers seize the chance to get into the market.
FOMO (the fear of missing out) could also push up prices faster than expected, according to the report.
"The rebound in 2019 was more rapid than we expected, meaning momentum may push prices up faster in 2020 than we have predicted as the "fear of missing out" increases," the report said.
"In addition, rising market sentiment and a jump in buyer demand, shown by rapid growth in mortgage lending as well as more people viewing property listings, will also push up prices," the report said.
But the coronavirus could impact price growth.
"The outbreak may be much more severe and cause a significant economic slowdown in China, which would have a big impact on Australia's economy," the report said.
"It would have the most significant impact on the Brisbane and Perth markets as these markets are most exposed to the Chinese economy."
New "macro-prudential" measures by the Australian Prudential Regulation Authority (APRA) could halt price growth if they were to rise rapidly this year.
"There is a chance that APRA will intervene to directly target property prices even if lending activity doesn't become speculative. But APRA would consider intervening only if price growth accelerated well above 10% or 20% annual growth in a number of cities," the report said.
Sydney house prices
The jewel in the crown of Australia's property market, Sydney's house prices are expected to surge by 10% in 2020. This will bring the median house price, which currently sits at $1.14 million to a new high of $1.25 million. To put it into perspective, that's an increase of $107,000 - a sizeable house deposit.
Not one to feel left out, apartment prices will also rise by an expected 8% this year bringing the new median from $735,000 to $795,000.
Prices should moderate in 2021, with more modest growth of between 6-8% for houses and 3-5% for units.
Last year, house prices soared by 7% in the Emerald City, far exceeding Domain's forecast of 0% price growth.
Melbourne house prices
In second place, Melbourne's median house price is set to rise by 8% in 2020, and then by a further 3-5% in 2021. If those forecasts pan out, Melbourne's median house price will rise to $974,000 this year and hit the $1 million mark in 2021.
This is 10% above the most recent peak of $909,000 in December 2017.
Unit prices are expected to grow rapidly by 5% in 2020 before slowing to 2-4% in 2021. That will bring the median unit price to around $577,000 this year - up from the current median of $549,000.
Brisbane house prices
House prices in the river city are also tipped to rise by 8% in 2020 and 2021, bringing the new median to over $620,000. According to Domain, this will be the first time median house prices will be above the $600,000 mark.
"This follows a period of soft price growth when Brisbane's house prices only rose by 5% in the previous three years," the report said.
As for unit prices, the report said they have "bottomed out" and will see more moderate growth over the next two years at 6% this year and 4-6% in 2021.
"A key driver of this turnaround is that apartment construction activity is reaching a low point over the next year or so," the report said.
Perth house prices
After a rough trot, Perth's long-running downturn should come to an end this year. Both house and unit prices are forecast to rise by 5% in 2020 and by 4% in 2021. By the end of this year, Perth's median house price should sit around $564,000 but this is still 8% below the December 2014 peak.
"Stronger population growth, faster economic growth driven by a mining sector rebound, and a tighter rental market are all behind a turnaround," the report said.
"Buyer interest has also risen, with "views per listing" up over the year and home loan commitments rising 15% between May and December 2019".
Adelaide house prices
Adelaide expects more modest price growth, with a 3% and 2% rise forecast for houses and units in 2020 and 2021 respectively. This would bring Adelaide's median house price from $542,000 up to $575,000. Unit median house prices would rise from $306,000 to $325,000 if these forecasts were to eventuate.
"There has been a smaller rise in home loan commitments in South Australia since mid-2019 than in other states, which points to a more modest rebound in 2020," the report said.
"A low rate of construction activity matches modest population growth. More potential buyers are looking for properties in Adelaide, but the increase has been smaller than in most other capital cities."
Hobart house prices
Hobart has been enjoying a housing boom for the last few years but that's expected to come to an end in 2020. House prices are only tipped to rise by 3% and then to 2-4% in 2021. Unit prices won't rise much either at 2% each year.
This would bring Hobart's median house and unit price to $560,000 and $460,000 respectively. They're currently at $530,000 and $441,000 respectively.
Canberra house prices
Canberra's house prices are forecast to rise by 4% in 2020 and in 2021 which would bring the median house price up to $820,000 by the end of the year. The median house price is currently $788,000.
Meanwhile, unit prices should enjoy a more modest pace of growth, rising only by 3% in 2020 and between 1-3% in 2021.
"The new apartment construction pipeline will contain price growth, particularly in 2020," the report said.
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