State-owned property prices could rise by up to 4% in 2024, and up to 8% in some capitals, a new report predicts, due to stage 3 tax cuts, rapid population growth and slow housing supply. ing.
The latest Prop Track real estate market outlook report, released Thursday, predicts home prices across the country will rise between 1% and 4% over the next 12 months, which is higher than the previous record of 5.5% in 2023. We expect the pace of growth to be slightly slower than that of the previous year.
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Note: 2023 price increases are year-to-date values from January to November 2023.Source: Prop Track
Real estate prices hit a new record high in November after rising for 11 consecutive months.
Cameron Kusher, director of economic research at PropTrack and author of the report, said he expects the trends that stimulated prices in 2023 will likely persist and support price gains next year, despite rising interest rates.
“Looking back to 2023, a number of factors fueled the recovery in home prices,” Kusher said.
“Due to the housing shortage and significant population growth, buyer demand has also increased significantly, while available inventory remains at low levels.”
In the 12 months to March 2023, Australia's population grew by 563,205 people. This is equivalent to the entire population of Tasmania.
“The latest indicators from international departures and arrivals data show little evidence of a slowdown,” Kusher said.
Cameron Kusher predicts that prices will rise further across the country in 2024, with some capital cities seeing even higher prices.
The third stage of tax cuts, scheduled to take effect from the middle of next year, could also stimulate demand for housing by increasing the amount of take-home pay for high-income earners.
“These factors are likely to lead to further price increases.”
Where prices are expected to rise the most
Although the pace of price increases is slowing nationally, forecasts vary widely by state and territory due to the deepening imbalance between supply and demand.
While total listing volumes in Sydney and Melbourne are currently above the 10-year average, price growth is expected to be more subdued compared to Brisbane, Adelaide and Perth, where supply remains extremely tight.
“In Brisbane, Adelaide and Perth, total listings were more than 30% below the 10-year average in November,” Mr Kusher said.
By comparison, total listings in Sydney and Melbourne are 1.6% and 10.8% above the long-term average, respectively.
Although the total number of listings is up from a year ago, it remains 23.9% below the 10-year average in November.Source: Prop Track
Sydney prices are expected to rise by 2% to 5% in 2024, up from a high rate of 8.3% in 2023. Melbourne is expected to grow between 1% and 4%.
Mr Kusher said Perth (+5% to +8%), Adelaide (+4% to +7%) and Brisbane (+3% to +6%) had consistently strong house prices. It is likely to drive home price growth across the country, he said. It will increase in 2023.
The report said prices could fall in smaller and medium-sized capitals such as Canberra (-1% to +2%), Hobart (-2% to +1%) and Darwin (-3% to 0%). I'm predicting.
“As we look at house prices in 2024, we look at the current trajectory of the market, where interest rates may go, what may happen to housing supply, and the impact of the interest rate hikes that have already occurred,” he said. It's important to consider.”
Supply delays are expected to drive growth in Perth, Adelaide and Brisbane.Photo: Getty
The Reserve Bank of Australia handed households an early Christmas present on Tuesday after leaving interest rates on hold at its final meeting of the year.
But over the past 13 rate hikes, from May 2022 to November 2023, mortgage payments jumped by an average of 62% and borrowing capacity decreased by more than 30%.
AMP chief economist Shane Oliver estimates that an adjustable-rate borrower with a $600,000 mortgage could end up paying about $17,000 more in annual mortgage payments.
Mr Oliver said: 'While most people may have been looking for more favorable terms, even with a 0.5% discount on mortgage rates, the additional mortgage payment would have increased by $14,900. “It will be.”
“It is hard to imagine that this will not have a significant impact on household spending. Particularly given the RBA’s analysis based on variable and fixed borrowers, around one in seven households with a mortgage already had a Cash flow has become negative and is now likely to become even more negative.”
Interest rate cut expected in 2024
Data released by the Australian Bureau of Statistics on Wednesday showed the household savings rate fell to 1.1% in the September quarter, the lowest level since December 2007 and down from a pandemic-era high of 24%.
AMP forecasts that the household savings rate will turn negative in the coming quarters as households continue to use up the buffers they accumulated during the pandemic.
CBA's head of Australian economics Gareth Aird said savings rates were now comfortably below the five-year pre-pandemic average of 6%.
“This data reflects the strain on the household sector, with individuals cutting back on spending due to higher inflation, higher interest payments and significantly higher tax payments,” he said.
Economic data released this week was weaker than expected, with inflation falling to 4.9% in the year to October, raising concerns that the Reserve Bank of Australia (RBA) may be forced to start cutting interest rates next year. Views are increasing.
Interest rates are widely expected to have already peaked.Photo: Getty
CBA expects the first rate cut to occur in September 2024.
“A month ago, the risks to our policy decisions were skewed towards rate cuts starting at a later date. However, the development of domestic and international data over the past month suggests that the risks have become more even. “There are,” Aird said.
Economists at ANZ also expect interest rates to remain unchanged until the Reserve Bank of Australia begins easing at the end of next year.
However, NAB expects another rate hike in February, which would take the cash rate to 4.6% and then leave it unchanged until late 2024.
But Kusher said the housing market remains resilient with “few forced sales, rising prices and strong demand in 2023.”
“Despite rising interest rates reducing borrowing capacity and housing availability, significant price declines after 2024 remain unlikely,” he said.
Trends that will shape 2024
The report predicts that regional resurgence will be one of the four key trends that will shape the real estate market in 2024, as deteriorating affordability in metropolitan areas drives more people out. There is.
Commenting on the forecast, PropTrack economist Anne Flaherty said home prices in rural areas have risen less than half as fast as in metropolitan areas over the past 12 months.
“With home prices currently at record lows, more homebuyers are moving to rural areas and this trend is expected to continue,” Flaherty said.
A regional revival could occur in 2024, according to new predictions from PropTrack.Photo: Getty
“Price increases are expected to continue into 2024, and the supply of homes for sale is expected to remain subdued relative to buyer demand.
“Furthermore, population growth is likely to outpace development activity and will continue to be hampered by high costs and construction times.”
PropTrack senior economist Paul Ryan sees homeowner upgrades taking advantage of the massive equity rally as another “key influence” shaping the market in 2024.
“The high proportion of borrowers with large deposits is one reason why prices in 2023 will be so resilient to rising interest rates,” Ryan said.
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“High deposit buyers are more insulated from the high interest rate environment, but the question in 2024 is how many of these upgraders will remain?
“Buyers with larger deposits are likely to continue to hold a higher share of the market in 2024, helping to sustain price growth despite rising interest rates.”
But Angus Moore, senior economist at PropTrack, predicts worsening affordability will continue to deter first-home buyers next year.
“The rapid rise in interest rates throughout 2022 and into 2023 dampened first-time homebuyer activity,” Moore said.
“In 2022, first home buyers decreased by about 30%. Although the housing market stabilizes in 2023, first home buyers remain silent.
“To date in 2023, activity has been even more subdued than in 2022.”
Mr Moore said the situation was unlikely to improve for homebuyer activity unless the outlook changed significantly.
Finally, Eleanor Krieg, senior economist at PropTrack, points out that the extremely tight rental market will support housing growth, as those who can afford to buy take the first step toward homeownership sooner than they otherwise would. did.
“A tight rental market and strong rental price growth are also driving investor activity, and a continued lack of inventory for sale is a factor supporting prices this year,” Cree said. said.
“Therefore, a tight rental market and strong rental price growth are likely to continue to cushion the decline in house prices.
The national vacancy rate fell to its lowest level on record in October, according to Prop Track data.
