NAB forecasts significant surge in Sydney house prices this year, up by 6.9%, with a potential increase of 11.8% next year—Sydney auction clearance rates reach 70%.

Week’s Key Focus

NAB predicts a substantial 6.9% increase in Sydney house prices this year, marking a notable turnaround from the previous forecast of a 2.2% decline.

The bank projects further growth of 4.9% by the end of next year, totaling a two-year increase of 11.8%. NAB adjusted its price forecast due to the surprising resilience of the housing market, as sustained demand and limited supply offset the impact of rising interest rates.

NAB’s Chief Economist, Alan Oster, notes that the short-term outlook for housing demand is robust, expecting a stable or slightly positive trend in house prices for the remainder of 2023. NAB still foresees two rate hikes this year, raising the cash rate to 4.6%, but anticipates a return to normal interest rates next year, which would support housing price growth.

Since the reopening of international borders in early 2022, Sydney has experienced a strong population rebound, driving increased housing demand. The need for additional living space during the pandemic also contributed to the market’s resilience.

Australia’s real estate market has outperformed expectations, with NAB’s residential property survey revealing a significant boost in confidence among real estate professionals. These experts expect national house values to rise by 0.6% in the next 12 months, with a long-term forecast of 1.7%.

However, rising interest rates continue to be the primary constraint for existing property buyers nationwide, while in states other than Western Australia, the main obstacle for prospective buyers is a lack of supply.

The survey found that real estate professionals believe expediting planning permits and development would be the most effective means to address Australia’s housing shortage. They also support financial incentives such as low interest rates and tax benefits.

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Auction Results This Week

Sydney: 589 properties were auctioned, with 392 reported results, and 276 sold, resulting in a clearance rate of 70%. The total value of auctions reached AUD 312,433,300, with a median house price of AUD 1,400,000.
Melbourne: 570 properties were auctioned, with 417 reported results, and 274 sold, leading to a clearance rate of 66%. The total value of auctions amounted to AUD 208,518,321, with a median house price of AUD 840,000.