What’s in store for 2024 according to John McGrath’s market wrap for 2023
Despite a short and sharp market correction, Australian home values have returned to growth much earlier than expected. Here’s what John McGrath thinks will happen next.
In spite of constantly increasing interest rates, Australian home values returned to growth much earlier than expected during FY23 due to a short and sharp market correction.
The East Coast market, led by Sydney, is experiencing a shortage of stock for sale that is providing a driving force behind this new market cycle.
Here’s a look back at FY23 and what’s ahead for FY24.
A pandemic market cycle unlike any other
CoreLogic now fully quantifies the impact of the Covid-19 market cycle on home values across the East Coast over 2020-2022.
Due to the newfound freedom to work from home, a large number of people from the southern states moved to Queensland to live a new lifestyle, making Queensland the biggest beneficiary of this extraordinary period in Australian real estate. With a 41.8% increase in values between the beginning of the pandemic and the city’s peak, Brisbane’s home values grew the most among East Coast capitals. Regional Queensland values climbed 42.6%.
At 38.3%, Canberra and surrounds recorded the second highest growth rate, followed by Hobart at 37.6%.
With 51% growth, regional Tasmania had the highest growth on the East Coast.
Other markets saw home values rise 24.5% in Sydney and 47.6% in regional NSW, and 10.7% in Melbourne and 34.4% in regional Victoria.
First interest rate hike since 2010: its impact
As interest rates rose from May 2022, the pandemic boom ended and a rapid correction ensued. Even though interest rates rose at the fastest rate on record, Australian real estate only fell by 10%, or so, as we usually see in a correction.
Home values changed across the East Coast’s capital cities and regions in FY23.
Median house price changes in FY23
•Sydney -5.7%
•Regional NSW -10.2%
•Melbourne -6.7%
•Regional Victoria-8.9%
•Brisbane -9.9%
•Regional Queensland-5.2%
•Canberra -10%
•Hobart -12.7%
•Regional Tasmania-7%
Source: CoreLogic Hedonic Home Value Index covering the 12 months to June 30, 2023
Major market trends
Capital city markets returned to growth sooner than expected in 2023 as a result of a shortage of homes for sale and strong buyer demand.
Many returning migrants are buying instead of renting because the rental market is so tight and weekly rents have skyrocketed.
A very strong employment situation also contributes to the strength of the market.
There was a decline in dwelling approvals in FY23 as a result of high construction costs and ongoing labour shortages. With fewer people building their dream homes, more competition in the established houses market resulted in higher prices.
Similarly, apartment approvals have fallen more than 50 percent below their decade-average over the past few years.
What’s ahead in FY24
Based on CoreLogic price data, the market appears to be rebounding in Sydney, Melbourne, and Brisbane now.
Due to strong interstate migration, the regions are also turning after a minor correction.
Some buyers are now looking beyond the more expensive big coastal towns to nearby tree-change areas for better values, as discussed in the McGrath Report 2023.
According to CoreLogic data, Queensland is leading the regional market bounce back, with house values up 1.7% and apartment values up 2.2% since the start of 2023.
A key factor driving growth in Australian property in FY24 will be migration. International students are returning, and we are seeing more skilled migrants that will fill a very large labour shortage.
Despite their love for Sydney and Melbourne, migrants are increasingly attracted to Queensland.
Keep in mind that your agent’s experience navigating changing market conditions will be crucial to getting the best sale price in FY24.
Since people are still leaving cities for sea-change and tree-change areas, regional sellers must bear in mind that the buyer pool for their homes has now expanded well beyond their own neighbourhoods.
Your home will appeal to a broader audience if you choose a local agent who has marketing reach and branding power back to the cities through their office networks and buyer databases.