Australian Housing Market Record Recovery Predicted for 2024 and Beyond

The Australian housing market has successfully rebounded from the downturn experienced in 2022, with two forecasters now predicting new price records to be set in 2024. Furthermore, medium to strong growth in home values is expected over the next three years. This positive outlook is backed by the latest report from property group Domain for the December quarter of the previous year, which reveals that combined capital house and unit prices ended 2023 at a new national record.

Domain’s Findings

According to Domain’s data, most capital cities in Australia witnessed price growth in 2023. Adelaide led the charge in median house price growth, with an astonishing increase of 12.7%. This was closely followed by Perth, which experienced a growth of 11.9%, and Sydney with 10.6%. On the other hand, Canberra, Hobart, and Darwin saw a decrease in median house prices by 4.6%, 2.5%, and 1.2% respectively.

Several cities also witnessed record-high prices in both houses and units. Sydney, Brisbane, Adelaide, and Perth saw house prices reaching new highs, while Canberra, Brisbane, and Adelaide witnessed the same for unit prices.

Domain predicts that the Melbourne property market, which has been lagging behind, will complete its recovery in 2024.

The Outlook

While Domain forecasts that national price growth will continue this year, the pace of growth is expected to be slower. The introduction of new stock into the market is anticipated to ease competition, but not enough to halt price growth. Additionally, an interest rate cut later in the year is expected to drive increasing demand and put upward pressure on housing prices.

Nicola Powell, Domain’s Chief of Research and Economics, also highlights the potential impact of Stage 3 tax cuts, scheduled to take effect on July 1st. She suggests that these tax cuts may alleviate some of the cost-of-living pressures, while easing inflation could improve mortgage affordability.

Insights from Oxford Economics Australia

Oxford Economics Australia presents an interesting comparison to Domain’s findings with their own property forecasts. They predict a relatively modest national home price increase of 2.7% in 2024, followed by a significant ramp-up to an average of 6.3% annual growth in both 2025 and 2026.

Oxford’s predictions highlight variations in growth rates between Australia’s major cities and different property types. For instance, they forecast a modest 3.3% rise in house prices in Sydney in 2023-24, while units are expected to experience a larger increase of 5.2%.

The Perth market stands out in Oxford’s forecast, with a median house price growth of over 10% in 2023-24 and 9.8% in 2024-25. Low levels of advertised listings and affordability in certain areas are expected to support prices in Perth, Brisbane, and Adelaide.

Maree Kilroy, Senior Economist at Oxford Economics Australia, highlights the divergence in capital city performances, with Melbourne and Sydney experiencing rising total listings that may slow price growth. However, she believes that interest rate cuts from late 2024 will boost credit availability and accelerate broad price growth once again.

Renters and Investors

Oxford Economics Australia predicts that the extraordinary rental growth observed in the past two years, particularly a 14.3% increase in 2023, will begin to moderate. They forecast a 4.1% growth in national rental prices for houses in 2024 and 5.8% for units.

Perth stands out once again in the rental market forecast, with an expected outperformance driven by population growth and relative affordability. Both house and unit rents in Perth are predicted to rise by over 9.7% per annum over the next three years.

On the other hand, rental growth in other parts of the country is expected to slow to an average of 2.6% in 2025 and 2026, which is similar to normal consumer inflation.

In conclusion, the Australian housing market is showing signs of recovery and is poised for new price records in 2024. While the pace of growth may slow, factors such as interest rate cuts and tax cuts are expected to drive demand and support upward price pressures. Rental growth is also predicted to moderate, with Perth being an exception due to its population growth and affordability advantage.