Top property predictions for 2024

Interest rate rises no growth deterrent

Top property predictions for 2024

Australian property experts have a lot to focus on in 2024 as rising interest rates, challenging cost-of-living conditions and economic uncertainty continues to impact buyers’ ability to purchase a home.

At a time when forecasting the future is increasingly difficult, and brokers, lenders and borrowers are bracing for the unknown, Mortgage Professional Australia offers insights from three industry experts.

Despite tough times, and ongoing interest rate rises, industry leaders remain optimistic about the year ahead predicting a buoyant property market where demand outstrips supply, and the rental market retains its strength.

Demand to exceed supply in many property markets

Adviseable buyers’ agent Kate Hill (pictured above, left) said the factors that put price pressure on properties in 2023, are set to remain this year.

“What I’m talking about are hundreds of thousands of new overseas migrants, billions upon billions of dollars in major infrastructure expenditure, as well as more buyer demand than supply of properties available in many markets,” Hill said.

“When you add in the very real possibility that interest rates may be heading down by the tail-end of this year, you don’t need to be Einstein to work out that market conditions are looking promising for both homebuyers and investors.”

Hill said anyone who purchased a sound and well-located property prior to the pandemic is probably sitting pretty when it comes to capital growth given property prices continue to be significantly above the level they were then.

“For those people who have purchased in the years leading up to the pandemic, this likely means they may have significant equity that can help increase their portfolio and their future financial position,” Hill said.

“Millennials and Gen Xers aged in their mid-30s and 40s who may have been homeowners for a few years now are the prime candidates to make their equity work harder for them.

“Unfortunately, many property buyers stayed on the sidelines last year because of some alarmist predictions that never came to pass — yet again.”

Hill said now that property prices are moving upwards in many locations, it’s vital that anyone considering a property purchase doesn’t find themselves looking back with regret when they have the opportunity, and the means, to do something now.

Despite the proven strength of the property market, Hill said there are still opportunities for investors on a tight budget, and buyers’ agents work with a range of clients where budget is a key consideration.

“Finding investment-grade stock isn’t impossible, but it’s vital that investors do the required amount of due diligence or engage the services of a qualified buying expert to help them,” Hill said.

Hill said record low rental vacancy rates are not budging anytime soon and will persist well past 2024 and without more investor activity into the market and fewer investors exiting the market too.

A PropTrack report from late last year showed there’s also plenty of international investor interest in Australia, with New Zealanders the most active buyers eyeing up property here, while Chinese investors are showing renewed interest.

Interest rates only one factor in property market

Kevin Brogan (pictured above, centre), national director, group risk and compliance Herron Todd White, said he expects the residential property market to follow the usual pattern of taking a few weeks of the new year to reawaken.

“It is likely that the trend of more properties coming to market will continue and this will test the depth of the market,” Brogan said.

“In some locations it is expected that the supply may exceed demand and that will exert downward pressure on prices.”

He said the fact that the RBA increased the cash rate by 25 basis points in November and inflation is still above the target range, means further rate increases this year can’t be ruled out.

“These factors will continue to affect the residential property market for at least the first half of 2024,” Brogan said.

“Interest rates are still a big factor for the residential property market, but the resilience shown in many markets demonstrates that interest rates are only one factor at play.”

Immigration pressure on property demand

Brogan said the lifting of international travel restrictions after COVID resulted in a “catch-up” phase for overseas migration.

“Net overseas migration is at a record high, and this has added significantly to demand for residential property and, in particular, has fuelled significant rental growth, which is likely to persist into 2024,” he said.

Brogan said the strength of many markets has masked the impact of escalating building costs for residential construction and there has been a decline in the number of new dwellings under construction, restricting supply and putting upward pressure on prices.

“The use of manufactured homes is being investigated (and has been embraced by the NSW Government) as a solution for providing good quality, quick and affordable housing,” Brogan said.

Brogan expects urban fringe markets and regional areas to remain strong.

“As is often the case, the headline figures can mask significant diversity between market segments defined by geographical area and price level,” he said.

“However, one characteristic is shared by most markets and that is resilience in the face of market headwinds.”

Terry Ryder (pictured above, right), Hotspotting director, said 2024 is shaping up as a positive year in residential real estate which will perform better than some pessimistic predictions made at the end of last year.

“I don’t expect boom markets, but steady and sustainable growth in most capital cities and regional markets,” Ryder said.

“Those who predicted significant price decline for 2023 and 2024 have something in common — they all believe the biggest factor is interest rates.

“In the simplistic mindset of bank economists, movements in interest rates dictate what will happen with dwelling prices.

“History has shown this is false and 2023 provided further confirmation; there were multiple increases in the cash rate, but prices continued to increase in most major markets, proving there were more powerful forces driving prices.”

Shortage of property, construction and rentals

Ryder said the main drivers for property price increases were a shortage of properties for sale, being built, and an undersupply of rentals.

He said the shortages had been exacerbated by high population growth and record levels of overseas migrants with no remedies in sight with the building sector unable to construct homes fast enough.

“All levels of government — but state governments in particular — stymie development with restrictive taxes and red tape which slows everything down,” Ryder said.

“Policy changes are invariably detrimental to investors which deters the cohort that supplies 90% of the homes people rent — and that worsens the rental shortage.”

Mixed bag predicted for country’s property markets

Ryder said there had been a strong increase in buyer activity in 2023 and this is the momentum that will create a strong start to the first part of 2024 in many key locations.

Ryder predicted rising markets in Sydney, Melbourne, Brisbane, Regional Queensland and Regional NSW in 2024 with steady markets in Adelaide, Regional SA, Regional Victoria, Hobart and Regional Tasmania.

When it comes to weakening markets, Ryder highlighted Perth and Regional WA, while he predicted the Canberra and Darwin markets will struggle.

Ryder said the locations to watch included those with affordable apartments, including inner-city Brisbane, Melbourne and Sydney.

What are your predictions for the Australian property sector this year? Share your thoughts below.