---
title: "The Report That Predicts 10-14% Growth and Why the Crash Callers Will Be Wrong Again"
description: "SQM Research forecasts 6-14% capital city growth in 2023. Rate cuts, 5% deposit schemes, and relaxed lending criteria create a triple tailwind. Here's the analysis."
author: Yan Zhu
date: 2024-12-19
category: Guides
url: https://premiumrea.com.au/blog/sqm-boom-bust-report-2023-melbourne-property-forecast
tags: ["SQM Research", "property forecast", "rate cuts", "Melbourne", "housing market", "RBA", "lending criteria", "property growth"]
---

# The Report That Predicts 10-14% Growth and Why the Crash Callers Will Be Wrong Again

*By Yan Zhu, Co-Founder & Chief Data Officer at PremiumRea — 2024-12-19*

> Every platform is full of people predicting a property crash based on an 18-year cycle theory. Meanwhile, SQM Research's Boom and Bust report projects double-digit growth in major Australian markets. Someone's going to be very wrong. Let's examine the evidence.

SQM Research releases a Boom and Bust report every year. It's one of the few Australian property forecasts that publishes scenario-based projections with defined assumptions, rather than vague directional commentary. Their track record over the past decade has been better than most.

The latest report models four scenarios for 2023, ranging from a base case of modest growth to an economic rebound scenario projecting 10-14% capital city average growth [1]. That's not a typo. Double digits.

Meanwhile, social media property commentators are calling for a crash based on the so-called 18.6-year property cycle theory — the idea that markets follow a predictable boom-bust-recovery pattern that repeats every 18 to 19 years. It's an elegant theory. It also doesn't account for the three specific policy tailwinds that Australia is experiencing right now.

## What SQM's four scenarios actually project

Scenario one (base case): one to two RBA rate cuts, inflation settling in the high twos, unemployment stable. Capital city growth: 6-10% [2].

Scenario two (stagflation): rates on hold, inflation sticky, unemployment rising. Growth: 2-5%. This is the bearish case, and even here SQM doesn't project negative growth.

Scenario three (global shock): external crisis, emergency rate cuts, uncertainty. Growth: 3-7%, with a wide confidence interval.

Scenario four (economic rebound): inflation drops sharply, unemployment declines, RBA cuts twice or more. Growth: 10-14% [3].

I'm betting on something between scenarios one and four. Here's why.

The RBA has signalled a willingness to cut if inflation continues moderating. Each 25-basis-point cut puts approximately $100 per month back into the average mortgage holder's pocket [4]. That cash doesn't sit in savings accounts. It flows straight back into the property market through increased borrowing capacity and reduced servicing costs.

Historically, the first rate cut in an easing cycle triggers a measurable increase in auction clearance rates within four to six weeks. Melbourne's clearance rate has been sitting at 60-65% for months — well below the 70%+ level that indicates a seller's market. Two rate cuts would likely push it above 70%, signalling accelerating price growth.

## The triple tailwind nobody is talking about

Beyond rate cuts, three policy shifts are simultaneously expanding the buyer pool.

First, the federal government's 5% deposit scheme has already helped more than 248,000 first home buyers enter the market [5]. That's 248,000 additional demand-side participants who would otherwise be renting. And the scheme has been expanded, not wound back.

Second, lenders across Australia are relaxing their serviceability criteria in ways not seen since before the 2017 APRA intervention. Some lenders now offer 90% LVR with no Lenders Mortgage Insurance for qualifying borrowers. Others have extended maximum loan terms from 30 to 40 years, reducing monthly repayments and increasing borrowing capacity [6].

Third, immigration is running at record levels. Australia welcomed over 500,000 net migrants in the past year [7]. These people need somewhere to live. Most rent first, then buy. They are creating demand for both rental stock and purchase stock in every capital city.

Rate cuts + expanded deposit schemes + relaxed lending + record immigration. That's not one tailwind. It's four simultaneous demand-side accelerators against a backdrop of chronic housing undersupply.

The 18-year cycle theory works in markets where policy settings are neutral. Australia's policy settings haven't been neutral in decades. The system is structurally configured to inflate property prices. Understanding that structure is more useful than memorising cycle dates.

## What 10-14% growth means in dollar terms

Let's make this tangible.

A property worth $750,000 today. At 10% growth over 12 months, it's worth $825,000 by the end of 2023. At 14%, it's $855,000.

That's $75,000 to $105,000 in equity created by holding an asset you already own. Not by renovating it. Not by adding a granny flat. Just by being positioned in the right market with the right policy tailwinds behind you [8].

For anyone sitting on the sidelines waiting for the crash that YouTube keeps promising: the opportunity cost of waiting another 12 months is potentially $75,000 in equity they didn't build. And that's at the conservative end of SQM's optimistic scenario.

I'm not saying prices can't dip in specific suburbs or property types. Apartments in oversupplied CBD towers might soften. Properties in new-build growth corridors with unlimited land supply might stall. But established houses on independent land titles in supply-constrained suburbs? The fundamentals are as strong as they've been in years.

The best time to buy was six months ago. The second best time is today. By the time the rate cuts are announced and the market sentiment shifts, the price has already moved.

## Why the cycle theorists keep getting Australia wrong

The 18.6-year property cycle theory originates from analysis of US and UK housing markets, where the pattern has shown some historical consistency. The theory posits that property markets follow a predictable boom-bust-recovery cycle of approximately 18 to 19 years, with a mid-cycle recession at the 14-year mark.

Applied to Australia, the theory would predict a major correction sometime around 2026 (18 years after the 2008 GFC, which itself was less of a correction in Australia than in the US or UK).

The problem is that Australia's housing market operates under conditions that the cycle theory simply doesn't account for.

First, Australia has mandatory superannuation that channels 11-12% of every worker's salary into investment vehicles. A growing proportion of this capital is flowing into property through SMSFs, creating persistent demand that doesn't exist in other markets.

Second, Australia runs one of the highest per-capita immigration programs in the developed world. Net migration of 500,000-plus in a single year creates housing demand equivalent to building an entire city the size of Canberra every 12 months. No amount of construction can keep pace, and the supply deficit compounds annually.

Third, Australian tax policy (negative gearing, CGT discount, depreciation allowances) creates financial incentives for property ownership that don't exist in the US or UK to the same degree. The after-tax cost of holding a property in Australia is substantially lower than the pre-tax cost, which supports higher price-to-income ratios than would otherwise be sustainable.

Fourth, Australia's banking system survived the GFC without a single major institution failing. Australian banks have never experienced the kind of systemic mortgage default that triggers price crashes in other markets. The lending standards, while they've fluctuated, have never deteriorated to US subprime levels.

Does this mean Australian property can never fall? Of course not. Specific segments (CBD apartments, oversupplied growth corridors, mining towns) can and do decline. But a broad-based, nationwide correction of 20%+ — the kind the cycle theorists predict — requires a combination of credit contraction, immigration collapse, and policy reversal that current settings don't support.

The crash callers have been predicting an Australian property collapse since at least 2003. In the twenty years since, the median house price in Melbourne has roughly tripled. At some point, the cost of being wrong for twenty years exceeds the cost of buying at any point during those twenty years.

## Positioning for the growth scenario without overexposing

Even if you believe the bullish scenario (and I think the evidence supports it), managing risk remains essential. Here's how I'd position a portfolio for 10-14% growth while protecting against the 2-5% scenario.

First, buy properties that generate positive or neutral cash flow from settlement. If growth disappoints and we get the stagflation scenario, your property still pays for itself. You never need to sell into a weak market because the tenant's rent covers your holding costs. This is the fundamental principle that separates property investors who survive cycles from those who don't.

Second, favour land over building. In every scenario — boom, stagnation, or correction — land in established, supply-constrained suburbs holds its value better than buildings or apartments. A $700,000 house where 80% of the value is in the land has a natural floor that a $700,000 apartment (where 90% of the value is in the building) simply doesn't.

Third, maintain a cash buffer. Don't invest every available dollar. Keep three to six months of holding costs in reserve. Rate movements, vacancy periods, and unexpected maintenance occur regardless of market direction. The investors who get forced out of the market are invariably the ones who stretched too far and left no margin.

Fourth, lock in interest-only loans for the first five years of any new investment. IO keeps your mandatory monthly outflow at the minimum, preserving cash flow flexibility. If rates fall (likely in the SQM base case), your cash flow improves automatically. If rates rise unexpectedly, you still have the headroom from not paying principal.

Fifth, buy now rather than later. This sounds like sales pressure. It's not. It's arithmetic. If the base case delivers 6-10% growth, a $750,000 property purchased today will cost $795,000 to $825,000 in twelve months. The $45,000 to $75,000 premium of waiting one year exceeds the potential downside even in the bearish scenario (2-5% growth on $750,000 = $15,000 to $37,500 of upside you would have captured).

The expected value of buying now versus waiting is positive in three of four SQM scenarios. Only the global shock scenario (3-7%) creates uncertainty, and even there, the projection is positive, not negative.

I don't tell people what to do. I show them the numbers and let the numbers make the argument.

## Melbourne specifically: why the forecast matters more here

SQM's national projections are useful, but Melbourne deserves specific attention because it's been the underperformer in the national property cycle for the past three years.

While Sydney, Brisbane, Perth, and Adelaide all recorded double-digit growth in recent years, Melbourne house prices grew by low single digits. The reasons are well-documented: Victoria's higher land tax rates deterred investors, extended lockdowns suppressed population growth, and negative sentiment created a self-reinforcing cycle of reduced buyer activity.

That underperformance is exactly what creates the opportunity.

When a market falls behind the national average, it doesn't stay behind permanently. Capital flows toward value. Interstate investors, international migrants, and local buyers who've been priced out of Sydney all look to Melbourne as the relative value play. This capital rotation has historically triggered catch-up growth phases in Melbourne that are sharper and faster than the preceding stagnation.

Specific Melbourne factors supporting the growth thesis:

Population recovery. Melbourne's population growth stalled during COVID lockdowns, but the rebound has been aggressive. Net interstate migration has turned positive, and international student arrivals have surged past pre-COVID levels. Every additional resident needs housing. Most rent first, then buy.

Infrastructure investment. The Suburban Rail Loop, level crossing removals, and the Metro Tunnel project are creating billions of dollars in infrastructure that directly improves property accessibility and amenity. These projects are years from completion, but the property market prices in infrastructure benefits well before the ribbon-cutting ceremony.

Affordability gap. Melbourne's median house price sits 20-25% below Sydney's. For a dual-income household earning $200,000 combined, Melbourne offers significantly more property per dollar than any other mainland capital. This affordability advantage acts as a magnet for exactly the demographic that drives sustained housing demand: working-age families with children.

KPMG's property forecast aligns with SQM's optimistic scenario, projecting Melbourne houses to lead national growth in the coming cycle. Whether the specific number is 8% or 14% matters less than the directional consensus: Melbourne is the value market in Australian property, and value markets attract capital.

The practical question for investors isn't whether Melbourne will grow. It's whether the growth has already started by the time they decide to act.

## References

1. [SQM Research, 'Housing Boom and Bust Report 2023'. Four-scenario projection model: base case to economic rebound.](https://sqmresearch.com.au/)
2. [SQM Research scenario projections. Base case: 6-10% capital city growth with 1-2 rate cuts and inflation in high twos.](https://sqmresearch.com.au/)
3. [SQM Research scenario 4 (Economic Rebound): 10-14% capital city growth with sharp inflation decline and multiple rate cuts.](https://sqmresearch.com.au/)
4. [Reserve Bank of Australia rate cut modelling. Each 25bp cut returns ~$100/month to average mortgage holder ($500K loan).](https://www.rba.gov.au/)
5. [Australian Government, '5% Deposit Scheme — Cumulative Participation'. Over 248,000 first home buyers assisted since inception.](https://www.nhfic.gov.au/)
6. [Australian Prudential Regulation Authority (APRA), 'Lending Standards Update 2022'. Lender criteria relaxation: 90% LVR no-LMI products, 40-year loan terms.](https://www.apra.gov.au/)
7. [Australian Bureau of Statistics, 'Net Overseas Migration', 2022. Record net migration exceeding 500,000 in 12 months.](https://www.abs.gov.au/)
8. [PremiumRea market analysis. $750K property at 10-14% growth: $75K-$105K equity creation in 12 months from passive hold.](#)

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Source: https://premiumrea.com.au/blog/sqm-boom-bust-report-2023-melbourne-property-forecast
Publisher: PremiumRea (Optima Real Estate) — Melbourne buyers agent