Australian home prices to beat inflation, poll shows

Australian home prices are expected to outpace overall inflation in the coming years despite diminishing hopes for interest rate cuts, according to a Wednesday Reuters poll of 14 real estate analysts conducted between May 10 and 28.

Analysts forecast home prices to rise by 5.3 per cent this year, with further increases of 5.0 per cent predicted for both 2025 and 2026.

The Australian housing market, one of the most expensive globally, has seen robust demand and inadequate supply from homebuilders, limiting options for new buyers.

Home prices, which surged over 25 per cent during the pandemic, fully recovered by the end of 2023 with an 8.1 per cent increase, despite the Reserve Bank of Australia’s (RBA) interest rate hikes to a 12-year high of 4.35 per cent.

Economists do not expect the RBA to cut rates until the fourth quarter of this year. The persistent supply-demand imbalance has led to moderate price growth. “We’ve under-built in the past two or three years already,” said My Bui, an economist at AMP.

All eight analysts who addressed the issue agreed that the supply of affordable homes would fall short of demand in the next two to three years, with four predicting it would be far short.

The average asking price of an Australian property in April was A$779,817 ($520,293.90), nearly eight times the average annual income, and close to 12 times in Sydney, where prices are forecast to rise by 4.5 per cent this year and 5.5 per cent next.

Michael Yardney of Metropole highlighted the challenges for first-time buyers as costs outpace income growth.

To address the housing crisis, the government, led by Anthony Albanese, has pledged to build 1.2 million homes by 2030. Analysts unanimously agreed that government intervention is necessary to improve housing affordability.