Key Australian property market trends of 2024

The Australian property market braces for a fancy 12 months in 2024, going through a confluence of rising rates of interest, financial uncertainty, and the unwavering need for homeownership.

Whereas consultants provide numerous forecasts, a standard thread emerges: a 12 months of adaptation, change, and probably, unexpected developments.

To navigate this intricate panorama, Australian Dealer sought insights from three business leaders:

Wealthy Harvey (pictured left), CEO and founding father of consumers’ company propertybuyer.com.au
Louisa Sanghera (pictured centre), director of mortgage brokerage Zippy Monetary
Mike Mortlock (pictured proper), managing director of MCG Amount Surveyors

Property market outlook: Subdued development, however pockets of energy

Buzzwords: COVID out, value of residing in

Most consultants agreed that the times of double-digit property worth hikes are over.

Harvey stated larger borrowing prices after 13 rate of interest rises would end in “subdued worth development”, monitoring between 3%-5% nationally.

“The phrase ‘value of residing’ has changed COVID because the buzzword impacting the financial system and property market,” Harvey stated.

Nonetheless, regardless of the opportunity of extra rate of interest rises to comprise inflation, Harvey stated the “vital undersupply of property” would end in upward worth stress in 2024.

Distressed promoting exercise on the rise

Sanghera painted a bleaker image, predicting “distressed promoting exercise” because of monetary stress amongst mortgage holders.

“A staggering 30% of mortgage holders, or some 1.5 million mortgage-holders, are prone to monetary stress and an extra 75,000 are becoming a member of them,” Sanghera stated.

Authorities’s housing plan ‘nigh on inconceivable’

“The tempo of building value development will gradual since provide chain pressures we noticed throughout COVID have returned to regular,” Mortlock stated. “Nonetheless, there’s nonetheless a major scarcity of building labour, exacerbated by the pipeline of presidency infrastructure tasks.”

“While building provide is constantly overstated because the panacea for the rental disaster, the truth that the pipeline of upper density residential tasks is a 3rd of the traditional figures will seemingly present no respite for tenants,” Mortlock stated.

“Main economists are predicting the nationwide property market to develop between 1.5% to eight%. My view is that it’s more likely to check or break the higher restrict of that vary.”

Key property traits to observe in 2024

Migration

With over 450,000 newcomers in 2023, the rental crunch is predicted to persist.

Harvey anticipated this to final or as much as 5 years, which advantages renters however places a major squeeze on renters.

Constructing approvals and building

One other key driver to observe is constructing approvals, with modifications to planning legal guidelines and zonings, emptiness charges, and new infrastructure bulletins changing into more and more essential, in line with Harvey.

“With constructing approvals at decade lows and better constructing prices, getting new inventory out of the bottom will probably be gradual and arduous — so the headlines concerning the housing disaster will proceed,” Harvey stated.

Sanghera agreed, saying that the shortage of inventory was a 2023 that’s more likely to proceed.

“It’s not solely in marketed listings but in addition by way of new constructions,” Sanghera stated. “This undersupply of properties on the market will hold property costs excessive subsequent 12 months in lots of areas across the nation.”

With the money fee lifting from 0.1% to 4.35% in below two years, Mortlock stated rates of interest would proceed to be “the elephant within the room”.

Nonetheless, he famous that it’s necessary to think about that property costs had risen regardless of the unprecedented tempo of rate of interest rises.

“The hole between client sentiment round property costs and the time to purchase a dwelling determine, factors to the truth that many consider the market will proceed to develop however are usually not in a position to take benefit,” Mortlock stated.

“Any discount in charges will definitely supercharge sentiment however extra importantly unlock further borrowing capability, which can put stress on costs.”

What property market segments will develop in 2024?

Upsizers, downsizers, and luxurious consumers

With borrowing capability severely crimped, consumers will seemingly look additional afield to seek out areas to suit their funds.

Harvey stated upgraders and downsizers have been two key segments of the market to observe this 12 months.

“These upgraders with sturdy borrowing capability will probably be in search of properties with bigger dwelling workplaces, further residing area, and way of life options for rising households,” stated Harvey.

Mortlock agreed with this evaluation, saying bigger properties in boutique developments will probably be in demand for downsizers.

Harvey additionally stated to be careful for luxurious consumers in 2024, who’re “in search of absolutely renovated homes, new builds or knock down alternatives in Sydney’s prime suburbs”.

“Good numbers of expats and better internet value locals will probably be chasing extremely restricted listings.”

Regional areas and Perth

Taking a look at geographical segments, Sanghera stated Perth could be the town most definitely to proceed to rise and “do very well” in 2024.

“There may be a number of continued curiosity in Perth, particularly from traders,” Sanghera stated. “Actually, in line with CoreLogic, Perth was the perfect capital metropolis performer this 12 months by way of dwelling worth development with costs growing by a formidable 13.5% within the 12 months to November 2023. Nonetheless, its common dwelling worth stays essentially the most inexpensive of each capital metropolis aside from Darwin.”

Mortlock anticipated regional areas to additionally carry out strongly, particularly the place there’s a numerous vary of employers and main infrastructure tasks within the works akin to alongside the inland rail hall.

“Diversified areas with median worth factors below $600,000 will carry out strongly given our knowledge on common investor buy costs and the gap persons are ready to take a position from the place they dwell,” he stated.

2024’s most stunning property development predictions

Housing market resilience

When requested what have been some stunning parts that can have a long-lasting impression available on the market, Harvey stated the “unbelievable resilience of the housing market” will proceed to shock in 2024.

“Regardless of the financial shocks, bricks and mortar stays a steadfast technique,” Harvey stated.

“Intergenerational wealth may even play a extra necessary function in serving to first dwelling consumers get into the market by way of the financial institution of mum and pa supporting with fairness loans or money.”

Rate of interest declines as inflation moderates

For Sanghera, essentially the most stunning development of 2024 will probably be that the money fee will drop again all the way down to the “late-3% vary” by the top of the 12 months.

“A lot of astute forecasters are predicting inflation to proceed to average extra shortly than beforehand anticipated,” Sanghera stated.

“Buyers have actually been struggling to buy in the next rate of interest surroundings, and lots extra have been battling their property loans switching from interest-only to principal and curiosity repayments.”

How the federal government will overcome the rental disaster

Mortlock’s prediction was that continued will increase in rents would seemingly affect housing formation charges and “actually” state political intervention.

“Adjustments to rates of interest, rate of interest buffers and any innovation round unlocking present provide by way of stamp obligation modifications or downsizing incentives can have lasting impacts,” Mortlock stated.

“Migration numbers will probably be attention-grabbing to observe, in live performance with unemployment charges and RBA choices as they try a gentle touchdown again into the goal inflation band by 2025.”

What are your property market predictions for 2024? Remark beneath.