The past 12 months have been full of speculation regarding the property market: how supply will affect prices, whether interest rates will continue to rise and what the future holds for the Aussie property market.
Here, our National Head of Acquisitions, Brad Purcell, gives us some insight into what 2024 could have in store.
How the market fared in 2023
Despite rising interest rates, the market outperformed most forecasts in 2023. The value of Australian homes rose by 8.1% in 2023, with key drivers being stock shortages paired with solid demand. In short, property was a safe bet for Australians looking to invest last year.
Looking at each capital city, Sydney dwellings rose in value by 11.1%, Adelaide dwellings by 8.8%, and Brisbane dwellings by 13.1%. Melbourne, however, saw only a 3.5% increase in dwelling value in 2023 while there was little to negative growth in Canberra (0.5%), Darwin (-0.1%) and Hobart (-0.8%). Perth outdid the competition, with dwelling value rising by 15.2%.
However, despite the overall strong performance, there was a marked slowdown in price growth in typically high-performing cities such as Sydney and Melbourne in the second half of the year. More affordable cities like Adelaide, Brisbane and Perth performed better in comparison.
Entering 2024
Brad says we’ve yet to see a significant change in the market in the early days of 2024. According to him, auction results in February will act as a litmus test for how the market will likely perform in the first and second quarters of 2024.
The strongest impacts
Two factors are expected to significantly impact the housing market in 2024. Firstly, strong stock availability should help even out the supply and demand imbalance that has defined the market in recent years. We know from selling agents across Australia’s capital cities that there is plenty of inventory heading into the first quarter of 2024.
The second factor is serious speculation about looming cuts to interest rates. Should this happen, we’ll likely see dormant buyers re-enter the market. The rise in interest rates has made people hesitant to invest in property, and it won’t be until interest rates come back down that we expect to see a change in housing activity.
“There are calls to review the mortgage serviceability buffer, which is currently 3%,” says Brad. A lower buffer will lead to increased borrowing capacity, which will, in turn, allow more people to enter the housing market.
The best time to buy in 2024
As always, the best time to buy comes down to individual circumstances. However, the market may become more favourable for buyers this year. If you’re considering buying, now is a great time to prepare yourself to enter the housing market when the time is right.
“A late spring (early summer) selling season seems imminent,” says Brad. There’s reason to hope that this will lead to favourable purchasing conditions.
How inflation uncertainty affects the market
According to Brad, the RBA expects an increase in unemployment to follow a slowdown in inflation. If this is the case, it will likely lead to fewer loan approvals, more buyer uncertainty and a widening gap between rich and poor.
Unemployment won’t be the only factor leading to buyer uncertainty. Inflation itself continues to be a source of speculation, and increases and decreases in inflation significantly impact the housing market.
While a slowdown in inflation may lead to increased unemployment, inflation continuing to rise carries risks to buyers.
“Rising inflation will also cut affordability and limit buying power, reducing or limiting property demand,” Brad explains.
Immigration affecting demand
Australia saw record-breaking skilled migration levels in 2023, with more people than ever before wanting to call Australia home. Higher migration means more competition for a finite number of properties, putting greater pressure on the market.
If you’re looking to purchase an investment property, expand your existing portfolio or find a family home, get in touch to discover how Brad and the Milk Chocolate team can help.
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