Several significant trends are expected to shape the housing landscape in 2024, driving increased demand but doing little to alleviate the ongoing supply shortage. This imbalance is likely to sustain upward pressure on property prices.
Reflecting on the surprises of 2023, Nicola Powell, Chief of Research and Economics at Domain, acknowledges the property market’s unexpected resilience amid the fastest interest rate-tightening cycle in recent memory. A surge in immigration and a slowdown in new home construction exacerbated the longstanding housing supply shortage.
Looking ahead to 2024, Powell emphasizes the enduring impact of the population growth surge, despite a peak in net overseas migration. Over 500,000 migrants arriving annually are expected to have a lasting effect. Those who found leases in the tight rental market may transition to property ownership, while newcomers may struggle to secure rentals.
However, the persistent lack of improvement in housing supply poses a challenge. Regardless of the scenario, an increased number of buyers vying for a limited pool of properties is inevitable.
Although recent data indicates a moderation in house price growth, Domain’s forecasts project a 6% to 8% growth for houses and 2% to 3% growth for units in Australian capital cities next year.
Powell identifies four major trends likely to influence the housing market in 2024, all contributing to upward pressure on prices. The “flight to affordability” is driven by buyers seeking alternative funding sources, including early inheritances or government home buyer schemes like the upcoming Help to Buy initiative.
Another noteworthy trend is a potential tipping point in the rental market, where tenants facing higher rents may transition to home ownership using first-home buyer incentives or shared housing arrangements, intensifying competition for available properties.
The third trend centres on interest rates; any reduction is expected to boost demand. Powell also highlights the potential impact of adjustments to the mortgage serviceability buffer imposed by prudential regulators. However, increased demand alone won’t address affordability without a corresponding increase in supply.
Powell underscores the urgent need for improved housing supply, expressing optimism about growing political attention and policy changes. Initiatives such as the federal government’s plan to build 1.2 million houses over the next decade and alterations to planning laws in Victoria, NSW, and the ACT indicate a shift in focus. With a federal election looming in 2025, the mounting housing challenges are likely to intensify political pressure for meaningful action.
Sound Property will continue our focus on the established house markets within Captial cities and major regional centres, using our tried and tested 15 Key Investment Driver framework. We are looking forward to a year of continued price growth and prosperity for our investors.
We appreciate that the approach to property investment should not be a one size fits all, and as such our diverse experience across the sector caters to a variety of clients with individual needs and strategies.
Our end-to-end service includes liaising with client’s advisors such as accountants, financial planners and mortgage advisors to achieve a measured and holistic outcome.
We look forward to assisting and supporting you with your next investment property in 2024.