What will 2024 bring to the Australian property market?
4 min read
2023 has been a year of paradoxes in the Australian property market.
Defying predictions and economic indicators, house prices not only resisted the expected downturn but escalated to new heights.
This phenomenon left many market observers puzzled, sparking a crucial question:
How did property prices manage to climb amidst a backdrop of rising interest rates and economic uncertainty?
The 2023 surprise: rising prices in a challenging climate
Early forecasts for 2023 painted a picture of increasing interest rates leading to a softening housing market.
Reality, however, took a different course.
Despite the Reserve Bank of Australia’s aggressive rate hikes (13 in the past 18 months, including five this year), lifting the cash rate from 0.1% to 4.35%, house and unit prices continued their upward trajectory.
This resilience was particularly evident in certain cities, which saw some of their most significant price gains in recent years.
By the end of 2023, according to Domain’s End of Year Wrap, the median house price in capital cities soared to a new record of $1,084,855, while the regional median hit $591,139.
| How much further do prices need to recover? | ||||
| Location | Houses | Units | ||
| Area | Median | From peak | Median | From peak |
| Sydney | $1,583,521 | -0.4% | $783,546 | -2.7% |
| Melbourne | $1,049,038 | -4.1% | $568,417 | -5.5% |
| Brisbane | $865,072 | At peak | $511,476 | At peak |
| Adelaide | $862,078 | At peak | $464,783 | -0.3% |
| Canberra | $1,050,575 | -10.6% | $554,266 | -9.1% |
| Perth | $724,033 | At peak | $380,435 | -9.9% |
| Hobart | $712,062 | -6.8% | $495,380 | -12.8% |
| Darwin | $649,538 | -4.3% | $382,403 | -21.4% |
| Capitals | $1,084,855 | At peak | $624,290 | -0.5% |
| Regionals | $591,139 | At peak | $455,884 | -0.3% |
Source: Domain End of Year Wrap 2023
Factors fueling the price surge
- Housing Undersupply: Dr. Nicola Powell from Domain highlights the severity of Australia’s housing undersupply, exacerbated by rapid population growth. This shortage has been a primary driver of the price rise, reflecting a deep-rooted issue in the Australian housing market.
- Fixed-Rate Cliff: Contrary to fears of the ‘fixed-rate cliff’ leading to a housing market collapse, the transition from fixed to variable rates did not trigger a spike in distressed listings. Mortgage arrears, while slightly higher, remain near historic lows.
- Population Growth and Migration: Post-COVID migration and demographic shifts have added significant pressure on housing demand, further fuelling price increases.
The 2024 outlook
According to Domain, looking ahead to 2024, the property market presents a complex and uncertain picture:
- Population and Supply Challenges: Continued population growth, coupled with a slow response in housing supply, is likely to maintain upward pressure on house prices.
- Policy and Economic Variables: Changes in lending policies, such as adjustments to the mortgage serviceability buffer, and potential shifts in interest rates, could influence market dynamics.
- Affordability and Unemployment Concerns: Affordability issues and a potential rise in unemployment could exert downward pressure on prices. However, this may be counterbalanced by wage growth or mortgage rate reductions.
House and unit forecasts for 2024
| Location | House | Unit |
| Sydney | 7–9% | 3—5% |
| Melbourne | 2—4% | 3—4% |
| Brisbane | 7—8% | 4—6% |
| Perth | 6—7% | 1—2% |
| Adelaide | 7—8% | 2—3% |
| Canberra | 3—5% | 2—3% |
| Hobart | 2—4% | +1%/-1% |
| Gold Coast | 6—7% | 4—5% |
| Sunshine Coast | 4—6% | 1—2% |
| Regional NSW | 2—5% | 2—3% |
| Regional Vic | 2—4% | 1—3% |
| Regional Qld | 2—5% | 1—2% |
| Capitals | 6—8% | 2—3% |
| Regionals | 2—4% | 1—3% |
| Australia | 5—7% | 2—4% |
Source: Domain End of Year Wrap 2023.
Key Trends to Watch in 2024
- Market Stimulus: Any reduction in interest rates or other economic stimuli could reignite market demand.
- Urban Dynamics: Urban spread and gentrification trends, as affordability drives people to new areas.
- Changing Attitudes: A shift from NIMBY (Not In My Back Yard) to YIMBY (Yes In My Back Yard) attitudes could facilitate urban densification.
In conclusion…
The Australian real estate market in 2023 has been a testament to the sector’s unpredictability and resilience.
As we step into 2024, the interplay of supply and demand, economic policies, and broader socio-economic factors will continue to shape the landscape.
For potential buyers and investors, understanding these dynamics is crucial in navigating the complex terrain of the Australian property market.
