2024's Property Market Predictions: What's Next for Australian Home Buyers?

The Australian housing market has certainly been a rollercoaster journey in recent years.
According to the CoreLogic Home Value Index (HVI), the market navigated a significant
turnaround in 2023, reclaiming stability with an 8.1% surge in home values. This gain was
a relief following a worrisome 4.9% plunge in 2022. However, this growth rate is still quite
a distance from the zenith of the 24.5% surge that we witnessed in 2021.

In the real estate world, it's important to remember that the devil is in the details. The
broader picture can often be deceptive, luring you into a false sense of security or panic.
Diving into specifics, 2023's housing market conditions exhibited substantial variation
across different regions and capital cities. For instance, Perth welcomed a robust 15.2%
surge in housing values, while regional Victoria had to grapple with a modest setback,
seeing a 1.6% decline. Meanwhile, there was consistent vigorous growth in Perth,
Adelaide, and Brisbane, however, Melbourne and Sydney hit a speed bump with a
slowdown in growth.

The rental scene also saw changes. Rental growth across Australia slowed to 8.3% last
year, compared to the 9.5% rise seen in 2022. Interestingly, unit rents were the star of the
show, outpacing house rents in growth. However, this is a changing narrative, the trend
for unit markets nationally is softening. Factors such as a slower wave of overseas
migration and affordability issues seem to be the key players fostering this slowdown.

As we step into 2024, the forecast for the housing market is that of cautious optimism.
The outlook predicts a more subdued outcome in the first half of the year. High interest
rates and weaker economic conditions will likely play spoil-sport, tapping the breaks on
housing activity. However, hope is on the horizon. If interest rates see a downfall later in
the year, we may expect a lift in consumer sentiment, potentially stimulating a more
favourable trend in housing activity and values.

Possible Factors that may contribute to Increased Housing Demand:
1. Reduced interest rates:
This year, interest rates have been a popular conversation starter at dinner parties, and
it's expected to continue into next year. Interest rates are predicted to be high long until
2024, according to Dr. Nicola Powell, chief of research and economics at Domain.

The amount that purchasers can afford to pay for a home will continue to be limited,
according to her, by stretched affordability and decreased borrowing power. In 2024,
policies that enhance the situation for purchasers may be implemented.

"The reduction in interest rates is likely to be among the factors that contribute to a shift
in customer perception. Reduced interest rates will contribute to better consumer
sentiment, and when consumer sentiment begins to climb, more housing activity is likely
to occur. This is anticipated to happen in late 2024.

2. Affordability:
Australia's median home price has returned to its record of $1,084,855, per the Domain
study. Additionally, the price of a regional home peaked at $591,139.

The markets in capital cities, such as Brisbane, Adelaide, and Perth, are likewise at all-
time highs, and the remaining capitals are also experiencing a rebound. Powell projects
that in 2024, prices will rise even more in all capital city and regional markets.

"We are likely to see that pepper the market of 2024," she adds, adding that buyers will
be looking for affordable solutions.

Powell notes that state and federal incentives designed to assist first-time homebuyers
or prospective purchasers—such as the federal government's Help to Buy programme,
which is set to launch in 2024, and the Queensland government's doubling of the first-
home buyer's grant starting in January 2024—will boost demand.
Although it could be a relief, Powell notes that a reduction in interest rates would
probably boost activity and possibly lead to another price surge.

3. Migrant Influx:
In 2024, population growth is expected to continue to be a key aspect of the housing
industry. Population increase has a long-term effect on property values, and domain
study shows that this trend will continue in the coming year.

Australia's population grew by 2.2% year over year in the year ending March 31,
according to ABS data, with net foreign migration accounting for the majority of this
growth across all states.

According to Peter Tulip, Centre for Independent Studies chief Economist, "Immigration,
and specifically the large number of students, so temporary student visas, are driving the
housing market. There would still be a severe housing shortage even if immigration
stopped tomorrow. That needs to be fixed”.

4. Rentals:
According to Domain's analysis, more tenants will probably be renting for longer periods
of time in the rental market as long as property values maintain their upward trajectory.

However, Commonwealth Bank head of Australian economics Gareth Aird says more will
need to be done to build supply. The housing market is under increased pressure due to
the growing population. To some extent, the country's rental markets are unique in that
they have all been quite hot. The east coast rental market was not as strong as Perth's
during the mining boom, he claims.

Conclusion:
The current state of interest rates in the housing market is a crucial factor that affects
buyers' ability to purchase homes. Factors such as incentives for first-time homebuyers,
changing attitudes towards housing development, population growth, and sustainability
will impact the housing market. Policymakers need to ensure that the housing market
remains affordable and accessible to all and that the sector is sustainable for future

generations. Understanding these factors is crucial for homebuyers, financiers, and
investors to make informed decisions about the housing market.

Stay tuned to Prevail Finance for more insights and advice on navigating the
Australian property market in 2024.
Sources:
https://www.corelogic.com.au/__data/assets/pdf_file/0013/20614/CoreLogic-HVI-
Jan-2024-FINAL.pdf

https://www.domain.com.au/news/what-to-expect-in-australias-property-market-in-
2024-1251886/

**The
information provided in this blog regarding Property Market of Australia in
2024 is for informational purposes only. Readers are advised to consult with
qualified financial advisors, real estate professionals, or other experts
before making any financial decisions or investments based on the information
provided in this blog.