Key factors regarding home prices in 2024
Here are the key factors facing the Australian real estate market right now, as outlined by industry experts.
After a whirlwind year of rate hikes, cost of living pressures and rental strife, economists and real estate experts are watching the Australian property market carefully to see what happens next.
Here are some of the big issues facing the property market in 2024.
After almost two years of RBA hikes, REIA president Leanne Pilkington said economists are divided about whether interest rates will begin to fall.
Several people believe interest rates have peaked and will begin to decline in the second half of this year, Ms Pilkington said.
According to PropTrack economist Anne Flaherty, stabilized or falling interest rates in 2024 could help restore buyer confidence following two years of uncertainty, leading to further price growth.
She said the rapid increase in interest rates caused a big drop in sentiment.
There was a lot of uncertainty about how much people would have to repay.”
However, international conflicts could push inflation, and therefore interest rates, back up again, said REBAA president Melinda Jennison of Streamline Property Buyers.
Consumer confidence can also be affected by it, she said.
Since the federal government announced plans to halve immigration by 2025, population growth is expected to be slower than in 2023, Ms Flaherty said.
Although fewer migrants are expected to enter the country this year, population growth is expected to put pressure on the property market – particularly the rental market in our major capital cities.
According to Pilkington, more investors exited the market last year and could continue doing so following the spate of interest rate hikes, contributing to the shortage of rental properties.
According to her, there are simply not enough rental properties to go around.
According to Flaherty, with vacancy rates near record lows across the country, rents are likely to continue rising in 2024, but at a more moderate pace than last year’s 11.5%.
HOME BUILDING INITIATIVES
It is true that home building incentives are in place, but the supply pipeline is very slow and is unlikely to make a significant dent in the supply shortage this year, Ms Jennison said.
According to her, the number of building approvals in the last 12 months has dropped in both detached and attached dwellings.
Besides the reversal of the surge in dwelling approvals caused by the Homebuilder incentive during Covid, there has also been a slowdown in new construction. Apartment developments have stalled due to skyrocketing construction costs, reducing the supply of new homes at lower price points.
IN 2024, THE KEY DRIVERS OF THE MARKET
*Interest rates – falling or stable rates in 2024 could increase consumer confidence and demand
* Cost of living – rising inflation through 2024 has reduced take home pay for many Australians while mortgage repayments have increased, affecting their borrowing power and ability to buy homes.
* Investors – High costs of living and interest rates have prompted many investors to sell their properties, reducing rental stock but increasing sales listings.
* Immigration – a decline in immigration could mean less demand for rentals, while experts predict that population growth will be strong enough to push rents up at a time when vacancy rates are near record lows.
* Building approvals – a slowdown in approvals and construction starts will exacerbate a chronic shortage of supply, potentially driving up prices
* Supply and demand – Perth, Brisbane and Adelaide, which have strong demand and relatively few listings, will continue to see price growth this year, while Sydney, Melbourne, Hobart and Canberra, which have more listings and fewer buyers, will see less price growth.