Increasing population will drive property price growth in Cairns above the Brisbane average over the next three years, according to a new report.
According to the organisation’s findings from its flagship Residential Property Prospects report “prices in North and Far North Queensland are starting from a more affordable base, while the downward trend in total listings is limiting the pass through of tight credit conditions”. Quarterly growth returned in both markets in the third quarter of 2023, with the median house price hitting $580,000 in Cairns and $410,000 in Townsville.
Oxford Economics Australia forecasts that the median house price will rise by near six per cent per annum in both regions over the three years to 2026.
This will see price growth outpace Brisbane, closing the price gap to the state’s capital.
The report said elevated home insurance costs in North Queensland had dragged on house price growth over the past decade, but the introduction of the $10bn Northern Australia Cyclone Reinsurance Pool in mid-2022 provides a potential upside for house prices via the reduction of insurance premiums.
Savvy buyers on the Northern Beaches of Cairns are now looking at Clifton Beach real estate over the more expensive neighbouring suburb of Palm Cove. RE/MAX sales agent Natasha Whalley-Thompson has just sold Stuart Kyle and Tony Head’s property on Linden Street, Clifton Beach, to an interstate couple before it went to auction. Picture: Brendan Radke
Maree Kilroy, report author and senior economist at Oxford Economics Australia told the Cairns Post: “Recovering tourist flows and a firming investment outlook will sustain a tight labour market, contributing to higher rates of population growth and maintaining pressure on the housing stock, driving upwards pressure on property prices”.
The report noted that risk exists for the Cairns market as the impact of tropical cyclones plays through.
Ex-tropical cyclone Jasper caused a record level of rain resulting in significant flooding.
This will impact the dwelling stock, likely pushing some residents into the rental market in the short-term, the report said.
Ms Kilroy said: “Short term, Cyclone Jasper will add pressure to the rental market with households needing significant repairs to their dwelling seeking temporary rental properties”. “Longer term the cyclone will likely lead to expensive home insurance bills in North Queensland adds downside risk to prices.”
Ms Kilroy said in the last few years affordability had deteriorated more so in Brisbane (and more broadly South East Queensland) than in Cairns.
“Recovering tourist flows and a firming investment outlook will sustain a tight labour market, contributing to higher rates of population growth” said Maree Kilroy.
She said that since bottoming out in the December quarter of 2022, Brisbane became one of the strongest markets through 2023.
Advertised stock levels are running more than 30 per cent below average, while the volume of home sales is trending almost five per cent above average levels.
“The return of interest rate cuts from late-2024 should facilitate even stronger price growth over the two years to FY2026.” the report said.
Loading embed…
(Bloomberg) — Australia’s housing market is at an inflection point as the factors that boosted prices to record highs last year are now starting to fade, according to Oxford Economics, which expects 2024 to be softer for property prices.
Most Read from Bloomberg
The company forecasts home price growth of 2.7% nationally in 2024, Maree Kilroy, senior economist at Oxford Economics Australia, wrote in a research note on Monday. That compares with an 8.1% surge in 2023, according to property consultancy CoreLogic Inc.
Read More: Australian Home-Price Growth Slows Further as Sydney Cools
Australia’s property market surprised with a recovery last year despite the central bank’s 4.25 percentage points of monetary policy tightening since May 2022. The increases were largely fueled by a lack of new housing stock and a surge in population growth.
The Reserve Bank last left interest rates at a 12-year high of 4.35% and maintains a hawkish tone as the economy and labor market show ongoing resilience.
The housing price momentum eased in recent months as rate hikes, persistent cost of living pressures, worsening affordability, rising advertised stock levels and poor consumer sentiment came together to take some heat out of the market.
Kilroy said deteriorating housing affordability will continue to play a key role in containing the pace of growth, especially for houses. Still, a significant shortage of homes is likely to persist across the country, placing a floor under prices, she added.
Australia faced a deficiency of more than 100,000 homes in 2023. That’s expected to ease slightly this year to roughly 97,000, Kilroy’s research shows.
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.