Property values could reach new price peak in two months, new Domain report shows

Woman worried about how much territory house values will regain by the end of 2023.

Great news for homeowners, bad news for home buyers: Domain says house and unit prices in Australia’s capital cities will fully recover value lost in the 2022 downturn by the end of 2023 – in two months. 

According to Domain’s House Price Report for the September quarter, house prices will reach a new peak in the capital cities if they gain another $2,000 in value. Units, usually the most affordable option for first-home buyers, only need $5,000. 

The report suggests price growth is primarily driven by interstate and overseas migration, a tight rental market, and chronic real estate undersupply. This is the third month in a row that property values have surged in Australia, as well, though Domain writes the pace of growth has slowed somewhat in September (1.8% growth). 

“It is worth pointing out that the pace of growth is currently being somewhat contained by the stretched affordability,” explains Domain’s chief of research and economics, Nicola Powell.

“If mortgage rates weren’t as high as they currently are, price growth would be faster with the current housing undersupply. So for buyers who are in the position of considering purchasing, it is important to weigh up the pros and cons of delaying their purchasing timing along with financial planning.”

Currently, the average variable interest rate for owner-occupiers is 6.61% p.a. in the Mozo database, but if the RBA hikes interest rates in November, this average will undoubtedly climb. 

How far median Australian property prices are from their peak (Domain - Oct 2023)

City
Median house price
Price from peak
Median unit price
Price from peak
Sydney
$1,578,099
-0.8%
$781,024
-3.0%
Melbourne
$1,032,266
-5.7%
$573,067
-4.7%
Brisbane
$848,752
-1.0%
$495,143
0.0%
Adelaide
$844,654
0.0%
$466,379
0.0%
Canberra
$1,042,730
-11.3%
$567,059
-7.0%
Perth
$713,811
0.0%
$379,347
-10.1%
Hobart
$717,004
-6.1%
$503,133
-11.5%
Darwin
$577,659
-14.9%
$369,860
-24.0%
Combined capitals
$1,072,480
-0.2%
$622,743
-0.8%

Home loan amounts needed to buy property inevitably increase as prices do. The average mortgage size in Australia is already at an eye-watering $585k, and Aussies need six-figure savings to afford the standard home loan deposit. 

A new price peak could make affording a home loan a lot trickier for first-home buyers – and if interest rates go high enough, it could ironically kill capital growth. Therefore, the cost of housing finance is a critical bellwether to watch in the housing market, not just prices. 

However, Domain says the home value momentum is self-sustaining for now. 

“September’s quarter confirms all Australian capital cities are in recovery or at a price peak,” says Powell. 

“Sydney continues to lead the recovery, with Brisbane close by. By the end of the calendar year, house prices in Sydney and Brisbane are anticipated to recover fully from the 2022 downturn, reaching new records.”

Finding a unique way into the property market, such as government schemes or rentvesting far afield, might be the only foot in the door many Australians can get. If you are in a position to get a home loan, be sure to compare some of the better ones on our best home loans hub. 

Compare low rate home loans in the table below.

Compare low rate home loans - last updated 26 May 2024

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    Package, Owner Occupier, LVR<60%, Principal & Interest

    interest rate
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    Initial monthly repayment
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    Owner Occupier, Principal & Interest, <80% LVR

    interest rate
    comparison rate
    Initial monthly repayment
    6.54% p.a.
    fixed 2 years
    7.10% p.a.

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  • Basic Home Loan

    Owner Occupier, LVR<60%, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    6.14% p.a. variable
    6.16% p.a.

    Enjoy a low rate home loan with $0 application fee and $0 ongoing fees. Flexibility to split your loan and set different repayment types. Fee free redraw from your loan using online banking. Flexible ways to repay. 40% Deposit required.

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* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

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