House hunters could be forced to add hundreds of thousands of dollars to their budget by the end of the year or else make compromises, after new economist forecasts tipped home prices to reach staggering heights.
Auction floors around the country have sustained a stunning streak of results and high clearance rates, prompting ANZ to lift its national house price forecast to a 17 per cent annual gain across the capital cities.
The national median house price was $852,940 in the December quarter on Domain data, meaning if house prices did move in that order they would rise $145,000 by the end of the year to $997,940.
Economists' predictions vary and forecasting is an inexact science — with the best available information experts tipped a 10 to 20 per cent property price drop at the height of the pandemic that never eventuated — but the prediction offers insight into the magnitude of the possible jump as interest rates stay low and buyers feel fear of missing out.
Sydney is expected to jump 19 per cent in 2021, which would cost house-buyers an extra $230,183 and take the median house price to $1,441,671.
It would leave buyers needing to save $288,334 for a 20 per cent deposit.
BresicWhitney head of sales and chief auctioneer Thomas McGlynn said these figures were not surprising given Sydney has recorded almost a three-month stretch of strong clearance rates and properties routinely smashing their reserves.
This unflappable demand for houses has left units out of favour seeing much smaller gains, which was likely to continue until buyers recognised the value in them, Mr McGlynn said.
“The difference between what an apartment would sell for compared to a house has widened. The value proposition is far greater than potentially stretching to buy a home,” he said.
“The farther away houses prices will get to apartments people will turn back to apartments simply because of the value that's on offer.”
He expected many pockets of Sydney to rise beyond the projected 19 per cent with expensive lifestyle locations and properties in hot demand.
“Locations anywhere from Coogee to Bondi buyers are applying the same value that were attributed to harbour front properties,” he said.
“Buyers that would stereotypically look at the eastern suburbs — Vaucluse, Rose Bay, Bellevue Hill, Woollahra those affluent suburbs that are closer to the city than the beach — we're seeing buyers there shift to the beach.”
The city has recorded massive price increases as fierce competition for lifestyle locations are playing out north of the bridge as well. North shore buyers cashing out of their properties and moving to the northern beaches to buy larger homes on larger blocks amid a backdrop of tight supply, he said.
The only factor that could put a dampener on price rises would be interest rates.
Melbourne
Melburnians will need to fork out an extra $149,772 under the predicted 16 per cent jump with the median house price reaching $1,085,845.
It will cost house buyers $217,619 to put together a 20 per cent deposit alone.
Buyers were reminded that forecasts were not always bang-on and that much of that growth had already been recorded in the first quarter of the year, according to Barry Plant chief executive Mike McCarthy.
“At best they're an indication of where they're heading. On that basis you have to take it with a grain of salt,” Mr McCarthy said. “Some of that 16 per cent over the year has already occurred.”
In January, the Barry Plant Group recorded an average property price of $663,000. By February, that had risen 8.6 per cent to $720,000, according to Mr McCarthy, who said more expensive homes traditionally sell at the start of the year.
“It underscores that prices are going up and we've already seen 8 percentage points — that's a fair chunk of it already.”
He said a rise in prices would affect anyone hoping to stretch themselves to buy, prompting them to compromise.
“If someone is looking at a property that is about $700,000 now and that is their full capacity and their property goes up to $800,000 they're still stuck at $700,000, that means yes they have to lower their expectation, look at a different suburb,” he said.
He said more homes were already being listed, which would not only give buyers more to choose from but also slow down the expected price growth for the remainder of the year.
Hobart
In Tasmania, house prices are expected to rise 18 per cent, which would add $101,536 to the median price costing buyers $665,627 by year's end.
Buyers would need to save a 20 per cent deposit worth $133,125.
The market was already well on its way of recording double-digit price growth, according to Ray White Victoria and Tasmania chief executive Stephen Dullens.
“We've seen more investors come back to the market, which again is a category of buyers where 12 months ago they weren't there,” Mr Dullens said.
“When you add back in first-home buyers and other buyers who weren't on the radar, there is a lot of demand.”
With such limited supply to satisfy demand in Hobart, Mr Dullens said he saw little evidence of price growth slowing down by the end of the year.
Brisbane
Brisbane has also recorded strong growth in the first few months of 2021 and that is only expected to continue, with ANZ forecasting a 16 per cent rise by the end of the year, adding $98,623 to the median house price.
It would cost buyers $143,002 to save a 20 per cent deposit on the expected median house price of $715,009.
Perth
House prices in Perth are expected to rise 19 per cent, taking the median to $670,225.
Buyers would need to save $134,045 to put together a 20 per cent deposit by year's end.
Adelaide
Adelaide's housing market is usually steady and it offers an affordable alternative to some of the larger capitals, with a December 2020 median house price of $574,264.
But prices are forecast to rise a strong 13 per cent this year, which would take the median house price to $648,918.
To put together a 20 per cent deposit, buyers would need to save $129,784.
* Source - Domain,com - Tawar Razaghi