Predictions for 2024 for Australian housing markets

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Nerida Conisbee, Chief Economist at Ray White Group, discussing Australian housing market forecasts.

Despite rapidly rising interest rates and strong population growth, a lack of homes coming to market and overall housing shortages led to big increases in both prices and rents across Australia in 2023. As we head into 2024, what does the future hold for residential property in Australia?

1. Price growth to continue

Despite many predictions of a catastrophic fall in house prices in 2023, they did in fact move in the opposite direction. Leading the way has been Perth but the combination of strong population growth and a shortage of homes was enough to combat rising interest rates. As interest rates head close to peak, it is expected that price growth will continue. 

At this point, housing supply remains extremely low and many people that would be new home buyers are being pushed into the established market. Big jumps in rents are pushing more first home buyers into the market and population growth is continuing to be strong. Concerns about affordability for both home buyers and renters will be big policy issues for 2024. 

2. Interest rates to peak but mortgage holders need to “survive until 2025”

Inflation remains persistent but is starting to come down. This means we may see another rate rise in 2024 however it does look like interest rates are either at peak, or very close. This is great news for mortgage holders who have had to endure the sharpest increase in rates ever recorded. While it is good news, the bad news is that we are unlikely to see a rate cut until late 2024 or early 2025. This means mortgage holders need to “survive until 2025”, paying far more on their home loans than they did two years ago. 

3. Housing supply to continue as policy focus

Australia is one of the least affordable countries in the world to buy a home and although our rents remain relatively affordable relative to incomes compared to most other countries, rapid growth has been stressful for anyone renting a home. Australia is also a world leader in not building enough homes and this is the key reason why housing is so expensive. It is great news that this has finally been recognised and is now a major policy focus. It will remain so for a long time. 

4. Look out for beach house bargains over summer but you need to move quick

While most of Australia saw price growth over the year, there were some parts of Australia that didn’t. In many beachside holiday destinations, we saw a sharp rise in properties for sale and a corresponding fall in prices. This was driven by many pandemic driven holiday home purchases coming back on to the market. While having a holiday home made sense in 2021, higher interest rates, the ability to travel again and restrictions on Airbnb have made it far more difficult. While prices are much more affordable, it may not last long with housing shortages a problem in many of these highly desirable parts of the country. 

5. Luxury apartment market to soar

The types of apartments being built in Australia have changed dramatically over the past decade. Whereas apartments in Australia were traditionally the place for younger people to live prior to buying a house, we are now seeing people choosing to live in apartments for longer or to downsize from a large home. Demand is increasing for much larger, higher quality, more expensive developments. This has resulted in the most expensive apartments in Australia seeing price increases more than double those of an average priced apartment. This year, fewer apartments being built, growing population and a desire to live in some of Australia’s most sought after inner urban areas will lead to a boom in luxury apartment demand. 

6. Homes to become even greener

While being environmentally aware drives some people to buy green homes, two other factors are now making them desirable for the wider population. The first is the rising cost of energy. Having a greener home utilising solar and batteries makes it cheaper to run air conditioning, heaters and pool pumps. The second is that what makes home green also generally makes them safer. We are heading into a particularly hot summer and having homes that are difficult to cool down makes them far more dangerous for the elderly and very young. Similarly research into cooking with gas has shown that it can be bad for various respiratory and cardiovascular health issues. 

7. Rents to stabilise but tough times for renters to continue

Surprisingly, Australia is relatively affordable for renters compared to most countries around the world. While this is the case, rents have risen rapidly since the middle of the pandemic, driven by a desire by many people to live alone, a lack of new housing development and the return of population growth. With household size increasing again, we are starting to see a stabilisation in rents, however it will take some time for new home development to catch up. In addition, investors are not particularly active at the moment, limiting the amount of new rental properties coming to market. 

8. More people living alone

Long term, social and demographic shifts are leading to an increase in the number of people living alone in Australia. Changing lifestyle preferences, delayed marriage, and an aging population are contributing factors. Shorter term, the pandemic has shown that given the chance, many people prefer to live alone with a record increase in single person households during the time. This trend may influence housing preferences, with a potential rise in demand for smaller dwellings and properties catering to individuals rather than traditional family units.

9. Not enough investors

There are not enough rental properties and without investors, this won’t change. “Mum and Dad” investors provide almost all rental properties in Australia. Government rental homes have declined dramatically over the past 25 years and while “built to rent” is seen as a potential way to diversify ownership of rental properties, it remains well under one per cent of total rental stock. Right now, investors aren’t very active. Interest rates are too high and there are a lot of impediments to owning a rental property relative to other investments. While this should improve marginally in 2024, there will remain a shortage.  

10. Institutional investment in living sectors to accelerate

Owning commercial property is challenging at the moment. Office values and incomes have declined significantly as fewer people return to the office permanently and shopping habits continue to show a growing preference for buying online. As a result, Australian and global institutional owners of property are looking to residential markets as an investment of choice. Spanning “build to rent”, retirement living, aged care and land lease, the “living” sectors are hot property, driven by a shortage of homes and population growth. In the next 12 months and beyond, your landlord may be the company that previously owned the office building you worked in or the shopping centre you visited on the weekend.

Article by:
Profile photo of Nerida Conisbee

Nerida Conisbee
Ray White Group
Chief Economist

Ray White is a household name in Australasia, synonymous with the property and real estate industry. The White family owned and led property giant, established in 1902 in regional Australia, has 1,000 franchised offices across Australia and New Zealand. The group, with more than 11,000 members, sold more than 108,000 properties last financial year worth well in excess of $103 billion in sales value. The group’s scale and geographic presence across Australasia, and the fact it attracts the top performers in each market, is its advantage. Led by Dan White, the group spans residential, commercial and rural property as well as hotels, marine, property management and a leading property funds investment and advisory. The market leader called 31,000 auctions across Australasia last year. The group has trademarked the term ‘competition creators’ as it firmly believes in the power of the open and transparent method of sale.

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