PRD Nationwide provided modelling to the Saturday Telegraph claiming Australian house prices will double to $2.4 million by 2030, driven largely by a lack of supply caused by strong immigration:
PRD Nationwide chief economist Dr Diaswati Mardiasmo said the market would eventually adjust to higher interest rates and the long-term outlook for home prices was increased growth.
Much of that growth would be driven by rising migration, a soaring city economy and developers not building new homes fastest enough to meet demand…
“At the end of the day, it’s about supply,” she said.
A doubling in house prices in just eight years is a wild stretch given the 30-year boom in Australian property values was driven by falling interest rates and easier access to credit:
Unless PRD Nationwide believes interest rates will go negative, then there is simply no way that house prices will magically double in such a short period of time, even with record immigration.
The fact remains that the cost and availability of credit is the key driver of house price growth, not structural supply-demand. Such strong price growth would only be possible if borrowing capacity is massively expanded and the cost of servicing debt plummets. It is hard to see how these conditions will be met this decade.
That said, I do believe that houses will perform better than units. With record immigration projected over the forecast period, there will be a relative scarcity of houses across Australia’s major urban centres. In turn, house values should grow more strongly than unit values.
If I had to nominate a price growth forecast for houses between now and 2030, I would tip 40% to 50% growth.
Prices will inevitably rebound. However, I doubt we will see mortgage rates return anywhere near their pandemic lows.
