Steady house price growth to persist in Australia's expensive market
BENGALURU, June 3 (Reuters) - Australian home prices will rise a steady 4–5% each year over the next three years in an already expensive and supply-constrained market, according to a Reuters poll of property analysts.
While those gains are modest by historical standards this builds on a near-40% price surge in five years, significantly boosting household wealth and investor returns in a country where two-thirds of households own their homes.
Despite the Reserve Bank of Australia (RBA) holding rates at a 12-year high of 4.35% through 2024, prices still rose about 5% last year, supported by strong population growth, chronic undersupply and a robust labour market.
The Reuters poll of 17 analysts, conducted May 16-June 2, predicted national home prices would rise 4.0% this year followed by gains of around 5.0% in both 2026 and 2027.
Home prices in Brisbane, Adelaide and Perth, which have surged about 80% in five years, will rise 5.0% in 2025, according to the poll. In Sydney and Melbourne they are forecast to rise 3.5%.
All 14 analysts who answered an extra question said RBA interest rate cuts - 50 basis points already delivered and another 50 bps expected this year - are likely to stimulate the market even though they expected no acceleration in house price inflation.
"We see a bit of a cap to the pace of home price appreciation in this cycle... While rate cuts would make it slightly easier for some borrowers to service the mortgage it is quite minimal compared to the 13 rate hikes we've had since 2022 and it's also minimal versus how much prices have gained," said My Bui, economist at AMP.
National home prices rose for a fourth straight month to a record high of A$831,288 and in every state capital in May, fuelled by interest rate cut expectations according to the latest data from Cotality.
That is nearly eight times average annual income.
Asked about purchasing affordability for first-time buyers over the coming year, a majority 10 of 13 analysts said it would improve. Three said worsen.
A full percentage point of rate cuts this year could lower monthly mortgage repayments by about A$430 on an average A$652,000 mortgage, AMP said.
But for aspiring first-time buyers, where the size of a deposit is often more important than the cost of borrowing, persistent price increases means affordability keeps getting stretched.
"It's going to be more beneficial to people who were already very close to buying a place. The first couple of interest rate cuts will have almost immediately increased their borrowing power. So they might be able to get across the line immediately and achieve home ownership," said Tom Devitt, senior economist at the Housing Industry Association.
"But relatively soon that will start putting upward pressure on prices again and so affordability is likely to deteriorate over the next few years until more fundamental reforms can actually boost housing supply."
As many find themselves priced out of buying, rents will keep going up. The median forecast from nine poll economists projects average urban rents will rise 3.0–4.5% over the coming year.
(Other stories from the Q2 Reuters housing market polls)
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