House prices anticipated to continue to grow
Property marketplace Domain has revealed price forecasts and five predictions for the property market next year in its 2023 End-Of-Year Wrap and 2024 Outlook report.
Nicola Powell (pictured above), chief of research and economics at Domain, said the Australian property market is anticipated to see “continued growth in house and unit prices, with some buyers, sellers, and renters proactively adapting to the lingering impact of the 2023 market movements and potential changes in the coming year.”
2023 saw price growth resist high interest rates and initiated a new cycle. Mortgage holders have been slugged by 13 rate hikes occurring the past 18 months, pushing cash rate up from 0.1% to 4.35%.
“What subsequently unravelled over this past year was a reverse of expectation that defied logic – as a shortfall of housing supply collided with rapid population growth, a strained construction sector and the tightest rental market on record — and Australian property prices rose,” Powell said.
“House prices for the combined capitals bottomed out at the end of 2022, allowing the new year to commence with a new price cycle, with Sydney leading the pricing recovery, followed by Brisbane. Adelaide and Perth are the only capital cities where house prices have persistently hit all-time highs and avoided any material downturns.”
So, what’s in store for the Australian property market in 2024, according to Domain?
An interest rate cut will increase demand
Limited affordability and reduced borrowing power hinder buyers’ ability to afford homes, but potential measures in 2024, such as interest rate cuts or stimulus measures, could boost demand and lead to a price increase later in the year. Alternatively, easing the mortgage serviceability buffer could accelerate access to the property market, increasing demand and causing upward price pressures.
The flight to affordability
Urban spread and gentrification will increase as people seek affordability. The rise in demand for affordable homes, especially through the federal government’s Help to Buy shared equity scheme starting in 2024, will lead to exploration of overlooked areas. Access to the program, restricted to states endorsing it, will support demand for affordable homes, especially units, in larger capitals.
Generational inheritance is also anticipated to rise as Baby Boomers contemplate early inheritance, potentially even skipping a generation to assist grandchildren, impacting buying decisions and capacities.
Policies geared towards realising the homeownership dream will intensify pressure on housing supply, as an escalating number of buyers compete for the limited available properties.
YIMBYs to replace NIMBYs
2024 is predicted to witness a shift from “not-in-my-backyard” (NIMBY) to “yes-in-my-backyard” (YIMBY) attitudes. Progressive housing and planning reforms on a national scale are expected, with a focus on enabling urban densification in areas people want to live in. The federal government’s initiatives to enhance housing affordability will generate substantial activity in the property market.
Population-driven housing demand
Strong population growth, influenced by recent record migration strength, is anticipated to remain a key feature of the housing market. Despite the net overseas migration peaking and an expected return to normal migration patterns by 2025, Domain is predicting population growth to continue to drive housing markets into 2024 and beyond. Together with a challenging rental market, it could encourage some shift towards buying, considering the difficulties in securing a lease.
Rental market reaching a tipping point
Australia’s rental market is predicted to play a much bigger role in 2024, with more Australians renting, and for longer. A tipping point is likely to be reached at some point, with rent growth slowing, and certain sub-markets operating with a more balanced rental market.
Factors such as stretched affordability, house shares, and first-home buyer incentives will contribute to transitions from renting to homeownership, benefiting cashed-up buyers as landlords divest early in 2024, Domain said.
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