Property Forecast for 2024

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Property Forecast for 2024: How Far Is Australia From a Property Market Crash?

Australia has had a tumultuous 2023 with the housing market at best and it doesn’t look like the ride is going to let up any time soon. Even as price hikes on the property market slow down, both landlords and tenants are going to have to take falling interest rates into careful consideration before making any big bets. According to CoreLogic, a prominent data group, the national median price for a home rose to almost $758,000 in December last year—the home value index rose by 8.1% nationally. Sydney, Perth, Brisbane, and Adelaide all ended the year with record-high prices, with Sydney seeing price increases of 0.2% in December alone. Melbourne on the other hand saw price falls in the final two months of the year. But what does such a mixed bag of results indicate for the next twelve months? 

The comebacks the property market saw in 2023 defy any attempt to pinpoint any precise forecast in the months to come. The increase in the home value index reversed a decrease of 4.9% in 2022. One reason for this unexpected performance lies in the continued hikes in interest rates, courtesy of the Reserve Bank. The decrease in borrowing rates in the country can be expected to feed into demand for the housing market. The other reason for the improved performance in the market is the steep increase in migration experienced in Australia. Australia saw the largest net overseas migration estimates in the year ending 30th June 2023. This is the highest estimation since records began in the country. The tally ultimately reached a record 510,000 in the 2022-2023 fiscal year. 

There is also a range of factors that can be expected to detract from demand for housing: the worsening cost-of-living crisis, the affordability challenge of the market, the rise in advertised housing stock as well as demoralized consumer sentiment are all expected to extend well into 2024. Accumulating stock in particular can be expected to contribute to the downside risk in housing values. The impact of immigration on property prices will also likely change over time. A mid-year economic report released by the government last month forecasts that net migration into the country would drop to 375,000 this year. It is expected to further decrease to 250,000 in 2025. Migrants generally take a considerable time to gain the necessary purchasing power and confidence to enter the property market, making their demand less sensitive to population fluctuations. This means that while falling numbers will help reduce the pressure on the rental market, this ease will likely not be felt for quite a while. 

Any reduction in prices in the rental market will of course be very welcome by tenants all over the country. Rent price increases are still more than four times the average increase in the pre-Covid decade, with Perth retaining its crown for the tightest market for renting. Unit rents in Perth rose to 16.5%, while house rents increased by almost 13%. Rents in Hobart and Canberra on the other hand have declined. The portion of household income required to meet rental payments also reached its peak of 31% at the dawn of the new year. This too is a record figure among others reached by the property and housing market. 

On the whole, many analysts expect the gains in property prices to continue well into 2024, even though the pace of growth might slow in the months to come. This can also be expected to vary on a state-by-state basis. Stage three tax cuts, which benefit high-income earners the most will also be an important factor that will come into play from the middle of the year onwards. On the whole, the same factors that resulted in property gains in 2023 will continue to influence property prices in 2024 with decreasing intensity. Decreasing affordability as well as the stress on labour market conditions will contribute to the decline in growth. Prices in the smaller capital cities will likely show sustained growth, while the growth in prices of the larger capitals Sydney and Melbourne will remain slow. Analysts estimate that Sydney prices will increase by between 2.0% and 5.0% in 2024, a significant decrease from the 8% growth experienced in 2023. The decline in prices seen in smaller cities such as Hobart and Canberra is only likely to continue. 

There are any number of ways that players in the housing market can use these changing variables to spin an opportunity from an unforgiving market. As of now, the high prices will continue to push some buyers, especially first-time homeowners out of the market. This however presents an equal opportunity for those who choose to remain in it. Well-priced houses and units will likely see quick sales as the market will remain comparatively competitive, something that everyone holding onto their property portfolio will be excited to hear. When it comes to moving property, it is important to remember that the new players on the market – Millennials and Gen Z—have quite different tastes in property shopping than the generations before them. The convenience of shopping for housing online, the increased awareness of the importance of responsible consumption, and changes in financial ideologies should all be looked at when looking to shift property. 

It is important to note however that property, which has always been the primary method of holding on to capital in Australia, is very shortly due to become a politically charged topic. Younger generations are finding it extremely difficult to find their footing on the open housing market, and property ownership is extremely skewed in favour of older generations simply by virtue of having ‘been there earlier’. The tension between the two parties will spill over into political campaigns in upcoming elections. The rights of renters are among the weakest in the developed world—a fact that will not be missed by youngsters looking to settle down into their adult lives. As long as the structure of Australia’s rental market continues to prefer the property rights of the landlords above that of tenants, the push and pull towards more inclusive housing policies will have to be monitored closely to ensure that the effects of undercurrents in the market, as well as blustered promises on the stage, do not pass by unnoticed. As for our initial question, Australia is still far from a housing market crash.