Surge in house prices set to continue

by Michael Matusik05 Oct 2021

With over 30 years of experience in property research and project advice, independent property analyst Michael Matusik outlines where he thinks Australian house prices will be heading over the next six months.

We know that much of the housing market’s current heat is being driven by cheap money, easy finance and recent government incentives. Also, house sales are rising while stock listed for sale is declining, adding another string to the housing market bow. The current lockdowns are giving people time to investigate buying, while keeping supply tight.

Owner residents and especially first home buyers have led the charge with – as explained in the last issue by Tom Uhlich of Boss Money – investors now joining the fray.

New construction has been the big winner, and, in this space, detached houses are beating attached dwellings.

House prices have been rising, with median values lifting by around 17% on average across the country during FY21, according to the ABS. What we don’t know is, will this price growth continue? And if so, by how much?

When asked such questions, I reach for my chart (at right), which helps explain the likely short-term direction of Australian house prices. The chart shows the relationship between the annual change in housing finance (brought forward by six months) and the annual movement in house prices.

This chart suggests that house prices are likely to surge further over the next six months.

If the past relationship between housing finance and house prices plays out over the next six months, then it’s possible that the annual rate of price growth for the year ending September could be around 25%, while the yearly growth rate for calendar year 2021 looks like it could come in at around 38%.

Yes, 38%!

If this price growth takes place, then the median Australian house price would be in excess of $1.135m by the end of this year. It was $825,250 in December 2020.

When breaking down the housing market by capital city, our work – again based on the relationship between finance and house prices – suggests we’ll see the following median detached house prices
by the end of calendar year 2021:

  • Sydney $1.64m
  • Melbourne $1.29m
  • Brisbane $790,000
  • Adelaide $705,000
  • Perth $849,000
  • Canberra $1.40m
  • Hobart $825,000
  • Darwin $710,000

With such heat in the market it isn’t surprising that media headlines are warning of APRA’s imminent tightening of the lending screws. However, the Reserve Bank is adamant that it isn’t concerned about the housing market, and claims that it will not tighten the cash rate any time soon.

From my point of view, if we see a somewhat calm transition between the current state of play and the opening of Australia’s internal and international borders before the end of the year – well, at least for those who are double vaccinated – and there’s a surge in economic activity post lockdowns, like we have previously witnessed, then 2022 could see further hikes in Australian house prices.

To keep up to date with my weekly thoughts on the Australian housing market, visit