The 2023 Australian housing market defying expectations and offered twists that have kept experts and enthusiasts on their toes. Approaching 2024, it’s essential to review the past year’s events and foresee the trends shaping the real estate landscape.
Unraveling 2023 housing market trends
Against the backdrop of escalating interest rates, the housing market demonstrated remarkable resilience, with property prices soaring against all odds. Surging demand and a scarcity of listings played pivotal roles, defying initial projections. Dr Nicola Powell, Chief of Research and Economics at Domain, says the surprise factor here lies in the ability of the market to not only weather the storm of rising interest rates but to flourish amidst it.
Projections for 2024 housing market trends
Peering into the crystal ball for 2024, expert projections suggest a continuation of the upward trajectory in house prices. According to Domain’s outlook for 2024, nationwide estimates indicate a 5% to 7% rise. Major cities such as Sydney, Brisbane, Adelaide, and Perth poised for even more substantial spikes ranging from 6-9%.
Key drivers of the market:
- Population growth: Dr Powell identifies post-COVID migration as a driving force. This emphases the critical need for increased housing supply to meet burgeoning demand.
- Interest rates: The evergreen topic of interest rates continues to dominate discussions. The Big Four banks anticipate late-2024 rate cuts, promising positive implications for housing activity and consumer sentiment.
- Affordability initiatives: The introduction of initiatives geared towards supporting buyers, including the Help to Buy scheme and increased grants. Buyers welcomed these incentives, but scrutiny has questioned their efficacy. Peter Tulip, Chief Economist at the Centre for Independent Studies, raises concerns. He suggests that these incentives, intended to support buyers, might inadvertently drive prices upward
Unpacking the anticipated 2024 trends
- Cash Rate Dynamics: Steering consumer sentiment and activity. If the much-debated interest rate cuts materialise in late 2024, experts anticipate they will significantly influence consumer sentiment and reignite housing activity.
- Population Growth Influence: A sustained driver of demand. The expectation is for continued robust migration patterns to sustain housing demand. Contrary to conventional wisdom, predictions suggest that even temporary residents, such as students on visas, will have a crucial role in shaping housing markets.
- Affordability Focus: Exploring overlooked opportunities. Predictions foresee buyers, motivated by affordability concerns, exploring sister suburbs and previously overlooked locations. Recent government initiatives, like the Help to Buy scheme, aim to further fuel this flight to affordability, aiming to bolster demand for affordable housing.
- Attitudinal Shifts in Housing: Progressive reforms on the horizon. The forecast for 2024 includes a visionary shift in housing and planning reforms across Australia. According to Dr Powell, a more permissive approach with the potential decentralisation of planning decisions will enable urban densification in areas where people desire to live. While some state governments have already initiated changes, experts caution that more will be needed to address the persistent supply-demand imbalance.
- Rental Market Dynamics: A tipping point on the horizon. Rental markets are predicted to reach a tipping point in 2024. Dr Powell predicts that rental prices will slow down. The evolving landscape might see more renters opting for shared housing, while first-home buyer incentives could prompt transitions towards homeownership or more affordable purchases.
The unfolding narrative of the Australian real estate market demands a keen understanding of the past, present, and future. As we embark on the journey into 2024, the interplay of these projected trends with the ever-changing market dynamics will define the experiences of buyers, sellers, investors, and renters alike. Strategically navigating this complex terrain will require a nuanced approach, aligning foresight with the present realities to make informed decisions in the realm of real estate.
* This blog is intended for general informational purposes only. For personalised advice tailored to your unique financial situation, please contact NMC Finance.