Property trends we can expect in 2024

February 16, 2024
February 16, 2024 Luke

Property trends we can expect in 2024

Key Takeaways

  • Moderate growth ahead after wild swings
  • Divergence between premium and affordable properties
  • Economy, rates to improve in late 2024
  • Immigration-fueled housing shortage persists
  • Relentless rent increases continue
  • Investors to progressively return

After the rollercoaster ride in Australian real estate over the past few years, many investors are wondering what’s next for the housing market. It’s been a wild few years, from the 2020-2021 boom fueled by record low interest rates to the 2022 downturn caused by rate hikes.

But 2023 saw the national market rebound, recouping previous losses. So what trends can we expect moving forward into 2024 and beyond? Here’s an in-depth look at what’s ahead.

Rising Prices to Continue, But Slow Down

Property values will likely keep increasing in 2024, just at a more moderate pace. Strong demand driven by immigration and undersupply of housing will continue to put upward pressure on prices. Established properties in particular have inherent value, as replacement costs are much higher now. And as buyer confidence returns amid stabilizing rates and inflation, demand will strengthen.

Overall capital growth is forecast to be around 6% in 2024 and 5% in 2025. Apartments and units are poised to outperform detached houses, which have become quite unaffordable. Proximity and lifestyle will be key drivers for buyers willing to pay a premium for walkability and amenities.

Emergence of a Two-Tier Market

Not all properties will appreciate equally. Inner and middle ring suburbs in affluent areas will significantly outperform outer and more affordable suburbs. This divergence will be driven by mortgage rates, rising living costs, and changing buyer preferences.

Middle and high-income earners will be less affected by financial pressures. And buyers will increasingly value proximity and lifestyle perks. Expect fierce competition for quality properties in established neighborhoods.

Economy and Rates to Improve in Second Half

Early 2024 may see more rate holds from the RBA. But later in the year, rates are forecast to start falling as inflation comes under control. This will boost confidence and borrowing power. The economy should also pick up steam after the slowdown.

Immigration and Housing shortages continue

Australia’s population exploded in 2022, but construction slumped. This mismatch of booming demand and inadequate supply will worsen the housing shortage. Even with immigration changes, strong permanent and skilled migration will continue. Vacancy rates already at record lows will keep dropping.

Soaring Rents Won’t Abate

Skyrocketing rents will persist with no end in sight thanks to rock-bottom vacancies and insufficient construction. Household sizes may creep up to adapt, but this will be offset by the population boom. New supply is badly lagging demand, worsening the cumulative housing deficit.

Investors to Gradually Return

Investors have been largely on the sidelines early in the cycle. But as rents and prices rise, more investors will likely enter the market. Over time, a new generation of investors may build wealth through property. But some will sell within 5 years, finding real estate investing takes work.

Perpetual Pessimists Will Keep Warning

As always, there will be those forecasting an imminent crash. But the data suggests otherwise. Strategic investors should see the slower growth as a window of opportunity rather than a threat. This period allows for finding bargains before competition intensifies again.

While the future is hard to predict precisely, the key drivers indicate Australian property still offers opportunities in 2024 for savvy investors. Staying strategic and focusing on fundamentals like supply and demand dynamics, rather than trying to time the market perfectly, will be key to success.

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