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Independent industry forecaster Oxford Economics Australia’s Residential Property Prospects Report also found that house prices were set to “accelerate” in 2025, with interest rate cuts anticipated this year.
But in contrast, growth in the hot national rental market is expected to slow in the three years to 2027.
“The capacity to absorb higher rents is topping out,” Oxford Economics said in a release.
And easing interest rates in 2025 and 2026 are predicted to blunt the impulse for landlords to push large rent increases on tenants.
Senior economist and report author Maree Kilroy said Perth was set to remain the star performer with regards to house price growth over the forecast period.
“After showing signs of softening in Q4, both Sydney and Melbourne have steadied, evident in an uplift in auction clearance rates – despite Sydney having arguably hit the peak of unaffordability,” Kilroy said.
“Adelaide and Brisbane have seen a continuation of late 2023 momentum, while Perth has sprinted ahead.
“While we expect national price momentum to slow in the second half of this year, it will accelerate again in 2025, with units set to outperform houses over the forecast period.”
Nationwide, the median price for homes in the December 2023 quarter rose 1.5 per cent to $946,000, driven by Perth, Adelaide and Brisbane.
Oxford Economics expected the combined capital city median house price to end 2024 up 4.7 per cent, while units are anticipated to rise 5.1 per cent.
Rents also rose in 2023, up 12.9 per cent for the year, with Perth a main growth driver.
By the end of 2024, house rents are expected to increase 6.5 per cent nationally, with units rising 8.1 per cent.
The suburb where house prices rose over $240k in three months
“From the current extreme low, we expect rental vacancy rates will lift slightly in 2024 but remain very tight by historical standards,” Kilroy said.
“Overseas migration looks to have peaked.”
Deteriorating rental affordability, particularly in Sydney, Hobart, and Adelaide, had seen people pooling resources in larger househoulds.
“Stress on household budgets has reached a level that will significantly limit the capacity for further rental gains while the return of interest rate cuts from late 2024 will ease leveraged property outgoings,” Kilroy said.
“On balance, we expect this to pass through to more modest rent increases at lease renewal.”
Oxford Economics expected rents to peak in early 2025, before tightening through to 2027.
