Property market outlook 2021: How will the capital cities perform?

Editor-at-Large · 7 December 2020
Want to know how the capital cities will perform in 2021? Here is one expert’s forecast for property prices around Australia.

Things are looking pretty good for Australian property prices according to forecasts made in Christopher’s Housing Boom and Bust Report 2021, released by SQM Research. Dwelling prices forecast to rise between 5% to 9%.

“As 2020 draws to a close, the national housing market has responded to the unprecedented economic stimulus packages as well as record low lending rates. Auction clearance rates have lifted since mid-year and various dwelling price measurements have started to record price rises. It is likely that the housing market will gain further momentum on the back of increased investor activity, especially from those who seek some sort of income yield,” said Louis Christopher, Managing Director of SQM Research.

The report looked at four possible scenarios depending on a number of factors including interest rates, JobKeeper, any further COVID outbreaks and the progress of a vaccine.

Property price forecasts

Scenario 1
(base case)
Scenario 2
Scenario 3
Scenario 4
City/Region 12 months to
22-Nov-2020All Dwellings

Source: Corelogic

Cash Rate unchanged at 0.1%

QE Expands

3rd COVID-19 wave contained via more lockdowns

JobKeeper extended to Sept Qtr 2021

Progressive roll out of Covid vaccine

JobKeeper phased out as planned (March)JobSeeker returned to base

QE unchanged.

Rates unchanged

Progressive roll out of Covid vaccine

3rd COVID-19 wave contained via more lockdowns

Better than expected roll out of Vaccine in 1st half of yearBounce in employment

No more lockdowns, State borders remain open, regional hub open

JobKeeper phased out as planned

QE scaled back after mid-year

No Vaccine released in 2021International/State borders remain closed

Negative cash rate

JobKeeper/Seeker extended to end of year

Perth +0.8% +8% to +12% +8% to +12% +10% to +15% +3% to +6%
Brisbane +3.5% +4% to +8% +4% to +7% +5% to +9% +3% to +6%
Darwin +2.8% +6% to +9% +3% to +6% +3% to +6% +6% to +9%
Melbourne +0.7% +2% to +6% -5% to 0% -1% to +4% -3% to +3%
Sydney +6.1% +7% to +11% 0% to +4% +3% to +7% +4% to +8%
Adelaide +4.4% +6% to +10% +1% to +4% -2% to +2% +4% to +8%
Hobart +6.4% +3% to +7% -2% to +3% +3% to +6% +1% to +3%
Canberra +6.8% +5% to +9% +5% to +9% +4% to +7% +2% to +6%
Capital City Average (weighted) +3.5% +5% to +9% 0% to +4% +2% to +6% +2% to +6%

Source: Christopher’s Housing Boom and Bust Report 2021, SQM Research.

As the table shows the base case forecast is for dwelling prices to rise between 5% to 9%. This assumes the cash rate stays at 0.1%, there is a progressive rollout of a COVID-19 vaccine and the potential for a third wave of the virus. Importantly it assumes JobKeeper is extended to the September quarter of 2021. “If JobKeeper is scaled back too prematurely, the housing market recovery in Sydney and Melbourne could stall,” added Mr Christopher.

Even in the other scenarios the overall outlook for the capital cities is pretty strong, with scenario two producing the weakest result of between 0 and 4%.

Here’s a look at each of the capital cities assuming the base case scenario.


Perth is set to be the best performer in three of the four scenarios. It is forecast to rise between 8% to 12% in both scenario one and two and do even better in scenario three. According to Mr Christopher this is “on the back of an ongoing recovery in the base commodities market, further encouraging mining-based project investment”.

“There now exists a significant shortage of Perth rental properties which translated into a greater than 9% rise in market rents over 2020. This shortage is very likely to translate into even faster rent increases and stronger buyer activity in 2021,” he added.


With prices forecast to increase by 4% to 8% under the base scenario the outlook is fairly positive for Brisbane. According to the report Brisbane fared relatively well in 2020 but outer locations were more popular than inner-city suburbs. There was a noticeable shift towards regional living but SQM Research thinks this may be a temporary phenomenon. As rents have fallen in Brisbane it may entice some of those people to move back.


Things are looking up for Darwin with Mr Christopher saying that it looks like the seven year housing downturn is over. Interestingly, though, he added that he is struggling to see the reason for the recovery.

Even though dwelling prices are predicted to increase by 6% to 9% under the base scenario Mr Christopher warned investors tread with caution.


Melbourne is forecast to rise at a more subdued rate of 2% to 6% under the base scenario. “This is due in part to the extended lockdowns in 2020, destroying many small businesses and so likely delaying a jobs recovery. The ongoing international border closures combined now with evidence of current interstate migration outflows will also put Melbourne at a disadvantage,” said Mr Christopher.

“Nevertheless, rate cuts as well as State and Federal Government stimulus will put a floor underneath the Melbourne market for houses. CBD units are expected to record ongoing price declines.”


Sydney dwelling prices are forecast to rise between 7% and 11%. “Leading indicators such as auction clearance rates and asking prices for Sydney are suggesting a forming recovery in the middle and outer rings. Inner city units continue to record price falls for which we do not expect this trend to change,” explained Mr Christopher. “The proposed NSW Stamp Duty/Land Tax opt-in for home buyers will be stimulatory to the housing market next year.”


Adelaide is also expected to do well with the report predicting dwelling prices will increase by 6% to +10% under the base scenario.

The report stated that Adelaide has been minimally impacted by the closure of the international border. The housing market largely defied the damaging effects of COVID-19 and this is expected to continue. SQM Research  is more positive on the outer suburban areas.


Hobart dwelling prices are forecast to rise by 3% to 7% under the base scenario. Hobart was also one of the better performers in 2020. The report stated that current indicators suggest another positive year for Tasmania and that the eastern side of Hobart will be the better performing region.

Tasmania does get a flow of net overseas migration, so the longer international borders stay closed the worse it might be for Tasmanian housing prices. And if the Aussie dollar rises it could hurt the city’s economy and housing market explained the report.


With a forecast increase of 5% to 9% in dwelling prices Canberra is also expected to do well. In 2020 Canberra has been the strongest auction market, regularly recording clearance rates in the 70% range. SQM Research expressed some concern about the unit market but, for the housing market as a whole, it is expecting a strong 2021.


Cover image source: wut62 (Shutterstock)

This article was reviewed by Editorial Campaigns Manager Maria Bekiaris before it was published as part of our fact-checking process.


Effie ZahosAbout Effie Zahos

Canstar’s Editor-at-Large, Effie Zahos, has more than two decades of experience helping Aussies make the most of their money. Prior to joining Canstar, Effie was the editor of Money Magazine, having helped establish it in 1999. She is an author and one of Australia’s leading personal finance commentators, appearing regularly on TV and radio.



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