Property prices tipped to rise 13% by end of next year

Stronger than expected conditions over the past three months have prompted NAB to revise up its near-term forecasts for the capital cities, with the bank now expecting prices to gain 8% this year, up from 4.7% previously forecast.

Prices are tipped to rise a further 5% in 2024 – unchanged from its latest forecast – for a total 13% growth over two years.

NAB chief economist Alan Oster said property prices "continue to be supported by a significant supply-demand imbalance", despite rising rates and reduced borrowing power.

“For 2024 we expect prices to rise by around 5% with population growth, rents growth and the labour market still supporting, offset by some pressure from the ongoing flow-through of higher interest rates," Mr Oster said.

Jump to see NAB’s price forecasts for each capital city

The higher price forecasts come even as NAB expects higher inflation will force the Reserve Bank to lift the cash rate to 4.35% at its November meeting, taking it to the highest level in 12 years.

“On rates, we continue to see the RBA lifting the cash rate to 4.35% at the November meeting before remaining on hold until the second half of 2024,” Mr Oster said.

“From there, we think the RBA can begin to ease policy back towards neutral of around 3% with growth below trend and the unemployment rate rising to around 5% by end 2024."

Australia’s unemployment rate currently sits at 3.6%.

The leaders and the laggers

While NAB sees strong price growth across the combined capital cities over this year and next, the momentum will vary between states.

After recording some of the strongest price gains this year, NAB expects the momentum in Perth will decelerate from a solid 12% growth in 2023 to around 1% in 2024.

Perth has recorded strong price growth this year, but NAB expects the pace will cool in 2024. Picture: Getty

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Brisbane prices, meantime, are expected to surge almost 19% over the two years, up more than 12% this year and 6.5% in 2024.

And Adelaide is expected to see strong gains of nearly 15% over the two years, with prices forecast to rise 8.6% in 2023 and 6.2% in 2024.

NAB dwelling price forecasts

PropTrack senior economist Eleanor Creagh said a lack of choice for buyers in these smaller capital cities has heightened competition, with the latest PropTrack Home Price Index showing prices hit fresh peaks in Perth, Brisbane and Adelaide in September.

“Adelaide and Perth continue to be the strongest performing capital city markets over the past year, with prices at record highs in both markets after rising 8.31% and 9.24% respectively over the past year,” Ms Creagh said.

“Home prices in Brisbane have already regained 2022’s price falls and are rising at a fast pace, jumping 0.39% in September to hit a new price peak.”

After booming during Covid, Hobart's housing market has underperformed this year. Picture: Getty

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At the other end of the spectrum, Ms Creagh noted Hobart remains the weakest performing market, with prices down 6.6% from the March 2022 peak despite rising 0.09% in September.

“However, this comes after several years of outperformance as well as strong growth during the pandemic. Home prices in Hobart are still up 38.4% since March 2020.”

According to the NAB forecasts, Hobart prices will remain flat over 2024, after dipping 3.3% this year.

Sydney is expected to see the strong momentum ease from a solid 11.6% in 2023 to 5% in 2024.

While Melbourne is expected to be the only capital city to see prices accelerate next year.

It comes on the heels of new property price forecasts from KMPG, which predicts house prices will rise 15% by mid 2025, while apartments will jump more than 9%.