Property market outlook: What’s in store for 2024?
If you’ve been following the property and economic news lately there has been plenty to digest and try to make sense of: interest rates, inflation and rents are up on previous years, while the supply of properties for sale, and especially to rent, remains constrained.
Then there are national property prices, which despite persistently high interest rates and costs of living, defied expectations in 2023 to increase by 8.1%. Most capitals saw price rises including Perth (15%), Brisbane (13%), Sydney (11%) and Adelaide (9%). There were also gains in Melbourne (3.5%) and Canberra (+0.5%) while prices fell 6% in Hobart and 0.1% in Darwin
The property market is a capricious beast that never stands still, that much is certain. Given its ever-changing nature we are always curious about what lies ahead - particularly at the start of a new year - so we decided to take a deep dive into some of the key influences and changes potentially in store for the property market in 2024. Read below for what we found.
Interest rates expected to fall in 2024
In what will be music to many a mortgage holder’s ears, the latest OECD Economic Outlook for Australia predicts the cash rate will remain at 4.35 per cent until the second half of 2024, at which point the Reserve Bank of Australia (RBA) is expected to start cutting rates.
Domestic experts, while slightly more cautious, also agree. Westpac chief economist Luci Ellis recently said, “It is more likely than not that the RBA has reached the peak of its rate hiking cycle.” While Adam Boyton, head of economics at ANZ – while not explicitly ruling out a rate rise – expects the cash rate to remain unchanged before a modest easing cycle starts late next year.
More help for first home buyers
Another recently announced government initiative expected to start this year is the ‘Help to Buy’ scheme, which allows first home buyers to buy property with a 2% deposit and no lender’s mortgage insurance. The government will co-own 30 to 40% of the property with buyers not liable for interest or rent on this portion. Like similar schemes, property price caps and income limits apply.
Lower migration levels
After the pandemic kept foreign students and workers away for two years, Australia’s net overseas migration reached a record high of 518,000 in the 2022-23 financial year, up from 170,900 the prior year.
While a large influx of workers and students was welcomed by universities and employers, experts believe this exacerbated pressure on an already tight rental market.
The Albanese government recently revealed its 10-year migration strategy, which forecasts net migration to fall to more normal levels of 375,000 in FY24 and 250,000 the following year. There are also plans to tighten visa processes for migrant workers and international students to help curb migration numbers.
With a return to more normal migration levels, it is safe to say we can expect to see some easing of housing demand, particularly in the very tight rental market.
A government cash splash to boost supply and affordability
This year the federal government announced billions in funding for a wide range of measures designed to improve housing supply and affordability, many of which are expected to commence in 2024. These include:
- 2 million new well-located homes to be built starting July 2024
- 30,000 new social and affordable homes via the Housing Australia Future Fund (HAFF)
- $350 million to deliver 10,000 affordable homes plus 10,000 homes by states and territories
- $500 million to kick-start housing supply in well-located areas
- $2 billion for 4,000 new social homes
- Up to 7,000 social and affordable rental homes
- $1 billion for social housing and $575M for social/affordable rentals
- A 15 % increase in Commonwealth Rent Assistance
- Planning, zoning and land release reforms to improve supply and affordability
- Plus, investment incentives for Build-to-Rent accommodation to help boost rental housing supply
A better deal for renters
The government has also recently vowed to improve life for renters, who could soon see their rights protected by national legislation.
Under the proposed changes, rent increases would be limited to once every 12 months, with renters only able to be evicted for justifiable reasons. In addition, soliciting rent bidding would be banned.
Rental applications will become easier, fees for breaking a lease limited, and rental properties required to meet minimum quality and safety standards. Renters experiencing domestic or family violence would also receive additional protections.
Despite interest rate rises and cost of living pressures, Australian property prices continue to remain resilient, which indicates strong underlying demand and insufficient supply.
The changes above are all expected to reduce pressure on the market, particularly when/if interest rates start to drop. But while lower migration and measures to improve housing supply and affordability are all great to have, by nature they are longer-term solutions whose effects will not be immediately apparent.
Without a crystal ball it’s impossible to predict exactly what will eventuate in the market, but it is safe to say that until supply-side pressures start to ease, the availability of stock to buy and rent is likely to remain limited, fuelling demand and ensuring property prices continue on a growth trajectory for some time to come.