Sydney House Prices to Soar Next Year

Median prices for real estate in Sydney are predicted to soar next year, with some properties estimated to record growth of up to 20 per cent.

The SQM Research Boom and Bust report identified three possible scenarios for the future of the real estate market in Australia.

Scenario one included no more than one 0.25 cash rate reduction and a possible rise during 2014.

Scenario two posed a strong economic recovery and a possible rise in the cash rate during 2014.

The third scenario was much more drastic and included a crash of the country's TOT (terms of trade), a 100 basis point reduction for the cash rate, and the Australian dollar falling below US$0.80.

In all of these three scenarios, the Sydney property market came out as a top performer.

To date, SQM Research identified that house prices in Sydney have already risen by 3.9 per cent for 2013. This is estimated to reach a total of 9 per cent to 12 per cent by the end of this year.

However, through scenario one, SQM has predicted that prices will rise by 15 per cent to 20 per cent.

The second scenario had even higher estimated growth, with Sydney's market to record rises of 20 per cent to 30 per cent.

"Sydney though is turning into a beast unto itself. We have a strong conviction that the ABS [Australian Bureau of Statistics] will record 15-20 per cent house price rises next year for that city," said SQM Research's Managing Director Louis Christopher in a September 16 statement.

"Such a rise will create a large dilemma for the RBA, especially if the national economy is still running below average growth."

It is not just the Sydney property market that will experience growth through these three scenarios, however.

Real estate in Perth and Brisbane is also predicted to grow modestly throughout next year in all three scenarios, with the exception of Perth in the third hypothesised situation.

Prices in Perth have already been growing at a steady rate over the past year, with RP Data recording a 9.4 per cent rise in prices over the year ending August 2013.

"The housing recovery that commenced in the 3rd quarter of 2012 for most capital cities is now about to enter into a more accelerated phase from what has generally been modest price rises to date," said Mr Christopher.

He commented that the growth will vary over the capital cities, with some areas recording much higher rates than others.