What will happen to the Australian property market this year?

The Australian property market is poised for continued growth in 2024, albeit at a slower pace than the previous year due to affordability challenges, economists from Westpac have predicted.

A price increase of 4% to 6% is anticipated, with the most significant gains expected towards the end of the year, coinciding with projected interest rate cuts by the Reserve Bank.

Recent months have seen little change in market conditions, with price increases moderating and sales activity experiencing a slight uptick. However, the market remains constrained by a tight supply of available properties for sale and rent.

Buyer sentiment has seen marginal improvement, buoyed by a less pessimistic outlook on employment and interest rates. Despite this, high inflation levels and the peak of the rate tightening cycle suggest a cautious approach to the future.

“We may not be quite out of the woods yet on inflation, but we have passed the peak and that probably means we’ve passed the peak for this rate tightening cycle,” said Matthew Hassan (pictured), senior economist at Westpac. “We think the RBA will start to ease rates by about September this year.”

He added that investor response to the easing cycle could significantly influence the market’s direction, particularly given the current focus on affordability issues affecting owner-occupiers.

“Overall, we expect a more moderate year for price growth compared with last year, with turnover likely to pick up a little while remaining low by historical standards,” Hassan said.

Westpac economists also took a closer look at capital city markets and found varying performance levels, with Sydney facing slow price momentum due to affordability pressures and Melbourne’s market having been impacted by increased property listings following state government policy changes.

According to Hassan, Brisbane, Adelaide, and Perth have experienced stronger price gains and tighter supply conditions, with different affordability impacts across market segments. Tasmania, he said, presents a unique case with rising rental vacancy rates and slightly declining prices.

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