Current market conditions have given a positive tone to the capital city's real estate scene this year, and several factors could further exert upward pressure on prices, said an expert.
The latest market forecasts by Domain indicate gains in all capitals over the next two years, with Sydney and Brisbane posting the most robust growth. Melbourne is also expected to do well and should reach the median price of one million dollar homes by 2021.
"Very low interest rates, and the hope that interest rates will stay low, will be the main driver of rising property prices in 2020", said Trent Wiltshire, an economist at Domain.
Read also: Prices could rise while vacancies remain low
The median combined price of housing in all capitals is expected to increase by 8% this year and up to 7% in 2021. For units, the rate at which prices should increase is also high, at 6% this year. and up to 5% in the next.
The table below shows the expected price growth in each capital:
Housing price forecasts – 2020 and 2021
House price forecasts
Forecast of unit prices
Current median price ($)
Current median price ($)
However, other upside risks could further stimulate expected price increases, including poor growth in construction.
Wiltshire said that even if construction activity is expected to start increasing again in 2021, the building industry's response may prove to be slower than in the past.
"Developers may be more wary of the sustainability of the rebound, and they also have more difficulty obtaining funding than in previous booms. If this happens, housing construction will not resume significantly in 2021, which which means that price growth could be faster than expected, "said Wiltshire.
Another factor is the success of the first home loan deposit system. Although the federal government has so far published only 10,000 locations for potential buyers, there are plans to expand the program and offer more.
If demand from first-time home buyers continues to strengthen, prices will naturally swell, said Wiltshire.
Intense competition for homes amidst the limited supply could also trigger the fear of missing out (FOMO) trend.
"The rebound in 2019 was faster than expected, which means that momentum could push prices up faster in 2020 than we expected as FOMO increases," said Wiltshire.
Recent figures from the Australian Bureau of Statistics show that homeowners were the main drivers of the price hike last year. In fact, homeownership loan commitments increased 20%, faster than the 11% gain in the investor segment.
"Over the next one to two years, investors may return to the market at a faster rate, which could mean a longer period of rapid price increases," said Wiltshire.
Get help with your investment property
Do you need help finding the right loan for your investment?
When investing in a property, it is important to make sure that you not only have the lowest available rate you can get, but also
Just fill in a few details below and we will then arrange a local Australian mortgage broker to contact you and determine the features or types of loans that suit your needs. We will even help you with the paperwork. In addition, an appointment is free.
We value your privacy and treat all of your information seriously – you can check