2023 presented numerous challenges for the real estate sector, grappling with escalating interest rates, surging house prices, insufficient supply, and heightened demand.
Looking ahead to the upcoming year, Domain’s 2024 Outlook Report foresees a persistent uptrend in both house and unit prices, sustained high interest rates, and robust population growth.
Domain’s Chief of Research and Economics, Dr. Nicola Powell, states, “We anticipate ongoing growth in house and unit prices, as some buyers, sellers, and renters proactively adjust to the lasting impact of the 2023 market and potential shifts in 2024.”
Here are Domain’s five forecasts for the property market in 2024.
- Interest Rate Cut to Ignite Demand
Challenges related to affordability and reduced borrowing power are expected to constrain homebuyers. However, a potential interest rate cut or relaxation of the mortgage serviceability buffer could enhance the outlook for buyers. The recent 25-basis-point increase by the Reserve Bank of Australia, bringing the cash rate target to 4.35%, might be countered by a reduction in the buffer, thereby increasing borrowing capacity and demand.
- Flight to Affordability
Facing affordability issues, some buyers may explore alternative suburbs, known as “bridesmaid suburbs,” as a second choice. Dr. Powell notes, “In expensive cities like Sydney, people are considering units over houses or looking further afield.” Additionally, Domain predicts the Help to Buy shared equity scheme, if implemented in 2024, to significantly impact affordability, aiding 40,000 Australians with a minimal 2% deposit.
- YIMBYs to Replace NIMBYs
Domain foresees a year of progressive housing and national planning reforms, with a shift from the “not in my backyard” (NIMBY) stance to “yes in my backyard” (YIMBY). Dr. Powell emphasizes the need for urban densification alongside urban sprawl, potentially involving single blocks accommodating two dwellings or three terrace houses.
- Population-Driven Housing Demand
While net overseas migration is expected to have peaked, strong population growth is anticipated to persist, influencing the market, especially in areas related to overseas students and available rentals.
- Rental Markets at a Tipping Point
With an increasing number of Australians opting for longer rental periods, Domain predicts a tipping point where rental price growth will likely decelerate, potentially in the latter half of the year. Dr. Powell highlights the continued tight rental market but suggests that policies favouring first-home buyers could alleviate demand, prompting a shift from tenants to buyers.
Source: ‘Absolute game changer’: Five property predictions for 2024 – nine.com.au