While there’s no shortage of uncertainty around the outlook for the housing market next year, REA Group expects 2024 to herald a modest rebound in home prices.
According to the REA’s PropTrack Property Market Outlook Report December 2023, strong demand and limited new housing construction will contribute to more price gains, albeit at a slower pace than this year.
While home prices have risen 5.5% year-to-date (to November), to sit at a record high, capital cities did the heavy lifting for price growth in 2023, up 6.6% over the same period.
More of the same
Despite interest rates remaining steady in December, PropTrack director of economic research Cameron Kusher suspects future increases – which are by means out of the question – could materially impact buyer and seller sentiment.
Be that as it may, a more likely option, adds Kusher, is a continuation of 2023 trends, with persistently low levels of stock available for sale amid increased buyer demand adding upward pressure on prices.
What’s likely to add to the upward pressure on prices, notes Kucher, is the bipolar shape of Australia’s property market. For example, buyers have been competing for a relatively low volume of stock with the total stock of properties for sale nationally at historically low levels, sitting 23.9% below its November decade average.
Kusher also points to rapid population growth as another major factor supporting prices.
“Over the 12 months to March 2023, the population of Australia increased by 563,205 persons. For perspective, that is just shy of the population of Tasmania being added to the country in one year,” said Kucher.
Adding to PropTrack’s expected uptick in national house prices were 2023 sales volumes which have been much stronger than those recorded in late 2022.
For example, preliminary sales volumes on realestate.com.au in November 2023 were 15.9% higher than November 2022.
“Even though there has been a moderate increase in listings coming to market, we have seen a pick-up in sales, despite much higher interest rates,” said Kusher.
Stock low – enquiries high
Despite low stock levels, the number of enquiries per listing on realestate.com.au has increased 20.5% year-on-year.
However, it’s worth noting that while total listings in Sydney and Melbourne were 1.6% and 10.8% higher than their November decade average, in Brisbane, Adelaide, and Perth, total listings were more than 30% lower over the same period.
While new listing volumes on realestate.com.au did increase from the middle of the year, mostly in Sydney and Melbourne, they did little to moderate price growth other than slow its pace.
National property prices expected to rise by up to 4% in 2024
At the capital city level, PropTrack expects prices in Sydney and Melbourne to increase between 2% and 5%, and 1% to 4% respectively.
Beyond the country’s two biggest cities, PropTrack expects:
- Perth 5% to 8%
- Adelaide 4% to 7%
- Brisbane 3% to 6%
- Canberra -1% to +2%
- Hobart -2% to +1%
- Darwin -3% to 0%
What’s expected in 2024
Despite higher interest rates reducing borrowing capacities and housing affordability, PropTrack believes a large depreciation in prices over 2024 remains unlikely.
Kusher also suspects the next round of tax cuts, which kick off in July – from which higher income earners have the most to gain – could lead to increased demand for higher priced housing.
Overall, while price growth is expected to be slower in 2024, PropTrack expects persistently strong demand for housing, limited new housing construction, and subdued total listing volumes to lead to further price gains.
However, unless housing affordability – which hit its worst level in at least three decades by mid-2023 – improves, PropTrack also expects first-home buyer activity to remain subdued.
“With affordability currently at record low levels, more home buyers will be pushed further out to the regions and this trend is expected to remain,” said Kusher.
“Buyers with large deposits will likely continue to make up a higher share of the market in 2024, and play a part in keeping prices elevated, despite higher interest rates.”
