Boom time for Aussie house prices


Leading Sydney real estate agent, John McGrath, has explained why he believes that house prices will continue to rise swiftly for another 18 months.

This would follow the 8.4% rebound in dwelling values at the 5-city aggregate level since values bottomed on 29 January, according to CoreLogic:

CoreLogic house price rebound

First, McGrath argues that supply will remain constrained given “dwelling approvals have averaged 13,355 per month over the past six months, which is 23% below the decade average”.


“The biggest chunk of this decline in dwelling approvals is being seen in the apartment category”.

The next chart shows that apartment approvals are tracking at their lowest level since October 2021 across the capital cities, and at a level that is less than half the 2016 peak:

Dwelling approvals capital cities

Second, McGrath notes that Australia is experiencing record net overseas migration:


“Government projections show we are expecting a net increase in migration of 715,000 people over the next two years alone”.

“A huge percentage of migrants start their new lives in Sydney and Melbourne, so this will be a significant driving factor behind higher home values and rents there”.

The next chart shows that this massive migration surge, alongside the collapse in dwelling construction, will cause growing shortages in the market:

Dwelling construction vs population

McGrath also notes that there is “a good absorption rate of new listings… which implies demand still outweighs supply in most markets”.


This is evidenced by total listings tracking 17.1% below the five-year average, according to CoreLogic:

Total Listings

Source: CoreLogic

Finally, McGrath argues that interest rates are about to peak:


“Inflation is trending down but the RBA thinks we won’t return to its target of 2% to 3% until 2025. Most experts say one more rate rise is likely before this rate hiking cycle ends”.

“It appears buyers and sellers have become accustomed to the new normal of higher mortgage rates”.

I don’t believe the RBA will hike again given average mortgage rates will continue to rise for the next six months as the fixed rate mortgage reset runs its course.

The domestic economy is also experiencing a per capita recession, with falling real household consumption and a weakening labour market.

Regardless, McGrath believes “Aussie home prices are likely to push past record highs and keep going over the next 18 months”.


I agree. Prices are already rising in the face of ongoing mortgage rate increases due to the acute lack of supply and soaring rents.

Once the RBA starts cutting rates next year, house prices should be off to the races.

About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.