As we step into 2024, the Australian housing market presents a landscape of moderated growth, shaped by a blend of economic factors and diverse regional dynamics.

After a surprising rise in property prices in 2023, all eyes are keenly watching the trends for the upcoming year. Read on as we delve into the current state of the market, property forecasts for 2024, and the key questions driving the future of housing in Australia:

- What will happen to Australian home prices in 2024?

- Are interest rates expected to decline in 2024?

- Will the housing supply increase in 2024?

- What will be the rental market trends in 2024?

- Are new investors likely to enter the market?

For those considering buying, selling, renting or leasing out a property in 2024, it's important to stay up-to-date about market changes to make well-informed decisions in this ever-changing landscape.

2023 Recap: A Surprising Turn in the Australian Property Market

Despite rising interest rates, Australia's property market experienced a robust rebound in 2023, defying expectations. The PropTrack Property Market Outlook report by realestate.com.au highlights several key trends that defined the 2023 market:

• Nationwide property prices rose by 5.5%, with a 6.6% increase across capital cities and a 2.8% rise in regional areas.
• Houses outperformed units in price growth, with a 5.6% rise for houses compared to a 5% increase for units. Notably, capital city house prices grew by 6.9%, outpacing units (5.3%). In contrast, regional markets saw stronger growth in unit prices (4.2%) than houses (2.5%)
• Despite higher interest rates, sales volumes in 2023 significantly improved from late 2022, with a 15.9% increase in November 2023 compared to November 2022.
• New listings increased by 4.7% year-on-year, though still 2.8% below the decade average. This trend was mainly driven by Sydney and Melbourne markets.
• Total properties for sale were higher than in 2022, but still 23.9% below the decade average. Sydney and Melbourne exceeded their November averages, while Brisbane, Adelaide and Perth remained more than 30% below their decade averages.
• Buyer interest surged, with a 20.5% year-on-year increase in enquires per listing on realestate.com.au noted in November 2023.
• Rental markets in capital cities experienced a 13.2% increase in rent year-on-year, a trend particularly evident in Sydney, Melbourne and Perth. In contrast, rents in regional areas stabilised from June onwards.
• Renters, especially in capital cities, faced challenges with rapidly rising rents and low vacancy rates. However, the pace of rent growth in 2023 moderated compared to 2022, suggesting a possible easing trend.

What lies ahead for the Australian Property Market in 2024?

Looking forward to 2024, it's essential to consider various factors to gauge the potential trajectory of home prices. Contrary to earlier predictions of a downturn due to rapid interest rate hikes and their impact on borrowing and affordability, the Australian property market has displayed remarkable resilience.

Predicting the path of home prices in 2024

In 2023, the Australian housing market demonstrated robustness, with no forced sales and a surprising increase in price growth and demand. The trends observed towards the end of 2023 indicate a more moderate trajectory for home prices in early 2024.

Tim Lawless, CoreLogic's Director of Research, anticipates that 2024 may progress in two distinct phases.

CoreLogic suggests that economic conditions such as high interest rates and weaker conditions will likely test the housing market, especially in the first half of the year.

A notable factor in 2023's resilience was the prevalence of high-deposit buyers, particularly those upgrading their homes, buoyed by equity gains from the pandemic boom. These buyers, less affected by higher interest rates, are expected to remain active in 2024.

Additionally, the introduction of stage three tax cuts from mid-2024, primarily benefiting high income earners, could stimulate demand for more expensive housing, potentially supporting price growth.

Where will interest rates head in 2024?

The question of whether and when interest rates will drop is a significant one, and will be a key factor influencing housing trends.

In November 2023, the Reserve Bank of Australia raised the official interest rate to 4.35%, a 12 year peak, in response to inflation. This increase reduced borrowing capacity significantly (around 30%) but does not necessarily indicate a substantial decline in housing prices for 2024.

Predicting the exact direction of interest rates remains challenging, but CoreLogic analysis suggests further significant hikes seem less likely due to weakening economic conditions and stabilising inflation. A mid-year rate cut could revitalise the housing market, particularly in the latter half of 2024.

Will there be more housing supply in 2024?

The construction sector continues to face challenges, even with a slowdown in construction cost increases. Combined with high demand from overseas migration, this could support housing prices by maintaining a degree of undersupply.

In Sydney and Melbourne, the trend of increased listings seen in late 2023 raises questions about its continuation into 2024. For other regions, the focus is on whether an increase in the low volume of stock for sale is on the horizon.

Housing affordability remains a key concern, with worsening metrics in home value-to-income ratios, mortgage servicing, and rental payments. Government policy responses are likely to focus on supply-side measures, including government initiatives like the Housing Australia Future Fund.

What will be the state of our rental markets in 2024?

The rental market is showing signs of gradual slowdown in rent increases as we head into 2024, hinting at a potential easing period ahead. While rents have continued to climb sharply, the rate of increase in 2023 was slower than in previous years, especially in the capital cities. Regional areas have seen more stability, with median rents maintaining at around $500 a week.

January, being the peak season for rentals, might continue to see rising rents, but with a possible moderation in the increase rate.

What is the real estate market landscape for investors in 2024?

The real estate investment scene is undergoing changes, with a noticeable trend of landlords exiting the market due to higher interest rates, increased land taxes, and recent property value surges. However, new investors also began to re-enter the market over 2023.

Anticipation of a stabilising interest rate environment in 2024, along with enhanced tax benefits and rising rental prices, could make property investment more appealing, especially as the rate of home price growth begins to slow.

While new investor interest may not fully offset the number of sellers, investor engagement is expected to grow stronger throughout the year.

With predictions of potential interest rate cuts and the continued rise in rental prices, investor confidence is likely to increase, making a return to the market more enticing in 2024.

Expert Advice for Your Real Estate Decisions

At Little Real Estate, our professionals possess extensive knowledge of both local and national markets. Whether you're looking to optimise your investment portfolio or achieve the best possible price for your property, our team can provide valuable strategies tailored to your needs.

Contact us today and see how our extensive real estate knowledge can benefit you.