Home prices to increase 6% in 2024: Westpac

Westpac’s senior economist, Matthew Hassan, has revealed that the major bank expects national house prices to increase by 6 per cent in 2024, and a further 4 per cent in 2025.

House prices grew by 10 per cent in 2023.

Hassan described national property price increases so far in 2024 as “reasonable” as housing supply continues to fall short of demand. The economist said that home prices across the states had “[diverged]” between the capital cities.

Westpac expects Perth property prices to increase the most significantly in 2024, forecasting a 14 per cent growth in dwelling prices. The major bank revealed that it expects a less significant increase in property prices in 2025 for Perth, predicting an 8 per cent increase.

Brisbane is forecast to have a 10 per cent increase in prices by the end of this year, according to Westpac, however, will have a sharp reduction in growth next year of only 3 per cent as the market becomes “very tight”.

Westpac continued that Adelaide house prices would increase by 8 per cent in 2024 and should only increase a further 3 per cent in 2025.

Melbourne and Sydney are expected to have less considerable growth, sitting below the forecasting national average at 2 per cent and 5 per cent, respectively. These growth rates should remain fairly stable in 2025, according to the major bank, with Sydney forecast to increase 4 per cent and Melbourne expected to remain at a 2 per cent growth rate.

Westpac said that gains in Sydney are “stalling” due to “severe” affordability constraints.

Commenting on the market in Sydney, Hassan said: “In Sydney, affordability is a major challenge with high prices causing some buyers to step back. However, limited supply is helping auction clearance rates to hold up relatively well.”

He continued, speaking on the property market in Melbourne: “On-market supply has been a key point of difference in the Melbourne market with state government tax changes triggering a surge in investor selling in the second half of 2023 that created an overhang of stock that has yet be absorbed.”

As supply has been largely driven by an influx of migration (with the Australian Bureau of Statistics revealing that the national population grew by 2.5 per cent in the nine months to September 2023), Westpac also provided its forecast for population growth rates.

The major bank said it expects population growth to slow as “foreign student flows start to ‘normalise’” and visa criteria tightening takes effect.

Hassan said: “Growth is expected to slow from 2.5 per cent in 2023 to 2 per cent in 2024 and 1.5 per cent in 2025.”

[Related: Rapid population growth worsening housing supply shortage: UDIA]