According to the latest QBE Housing Outlook Report for 2019-2022, house prices across all capital cities are expected to stabilise over the coming year, before population growth and a downturn in new dwelling completions results in prices increasing.

QBE’s research, produced in partnership with BIS Oxford Economics, predicts that after experiencing slowing growth or declines in median house prices over the past two years, easing lending restrictions, tax concessions and lower interest rates are expected to encourage borrowers back into the market - having a positive impact on property prices.

Although growth in median house prices is forecast across all capital cities by 2022, Brisbane is predicted to have the strongest growth, up 20.3%, thanks to the city's relative current affordability and anticipated population increases which will increase demand and prices. Adelaide is also anticipated to experience strong median house price growth, up by 12.7% by 2022. On the other hand, whilst Sydney and Melbourne are forecast to experience growth, rates are more modest at 5.8% and 5.1% respectively.

Median unit prices are also anticipated to increase across Australia in all capital cities except for Sydney according to QBE's research. Sydney's median unit values are anticipated to contract by 0.3% by 2022. Although down overall over the three-year period, Sydney's median unit prices are predicted to have rebounded following the anticipated low in 2020. This trend is also anticipated in Melbourne and Brisbane. Overall, Melbourne has forecast value growth of 3.8% by 2022.

Although from a lower base, Darwin is the stand-out performing city in terms of median unit prices, up by 9.2% by 2022. Canberra and Perth are also predicted to record strong median unit value growth at 6.7% and 5.3% respectively by 2022.

QBE Lenders’ Mortgage Insurance (LMI) CEO, Phil White, said growing supply and demand imbalance is likely to be a powerful factor for some markets.

“As well as lower interest rates, and expectations that these will remain low for some time, Government incentives and an easing of lending restrictions, our report suggests that a drop off in construction completions is likely to drive prices higher over the next few years.”

“Building approvals fell by 19% in 2018/19 and completions are forecast to fall to 163,500 dwellings by 2020/21 (down 22% from the average over the past five years). With population growth expected to remain strong, that’s well below underlying demand. This could mean some previously oversupplied markets will tip back into undersupply by 2021/22. With other factors also stimulating the economy and by association the housing market, there is potential for a recovery in prices.

“All capital cities have seen an increase in the level of apartments being built. This is likely to create pressure on two fronts. Firstly, higher density buildings take almost three times longer than houses to reach the market. And secondly, owner-occupiers typically prefer ready-to-move-into properties.

“This discrepancy between current demand and the timing of future supply is likely to result in greater volatility and upward pressure on property prices.

QBE's Housing Outlook Report is now available for download, free, here.