Australian Property Market Affordability Constraints and Predictions for 2024

The Australian property market continues to experience price growth, although at a more muted pace. This suggests that affordability constraints are starting to have an impact. According to one economist, there may be another downturn in the national housing market in 2024.

Rising Home Values in 2023

In December, home values in Australia increased by 0.4 percent. Throughout the entire 2023 calendar year, prices were up by 8.1 percent, as tracked by CoreLogic. This monthly growth rate was the smallest gain since prices began rising again in February 2023, following a decline in 2022.

Disparity Across Cities and Regions

A defining trend of 2023 was the widening disparity across cities and regions in Australia. Tim Lawless, the research director at CoreLogic, attributes this diversity to factors related to demand and supply. Affordability constraints in the Queensland, South Australian, and Western Australian capitals were not as severe as in Melbourne and Sydney. Additionally, the advertised supply levels have remained persistently and substantially below average in these regions.

Slowdown in Melbourne and Sydney

In Melbourne and Sydney, the growth of dwelling values has slowed significantly since June. Both markets have yet to return to their record highs. In December, home prices in Sydney increased by 0.2 percent, while Melbourne experienced a decline of 0.3 percent for the second consecutive month. On the other hand, Perth, Brisbane, and Adelaide recorded another month of convincing growth.

Softer Year for the Smallest Capital Cities

Hobart, Darwin, and the Australian Capital Territory had a softer year in residential property. Hobart’s dwelling values decreased by 0.8 percent over 12 months, Darwin was 0.1 percent lower, and the Australian Capital Territory recorded a modest 0.5 percent increase. This was in contrast to the larger capital cities, which outperformed the regions in 2023.

Forecast for the Housing Market in 2024

According to Tim Lawless, housing markets in Australia have lost some momentum. The market experienced a peak in monthly growth in home values in May at 1.3 percent. However, factors such as rate hikes in June and November, increasing cost of living pressures, worsening affordability challenges, rising advertised stock levels, and low consumer sentiment have gradually cooled the market in the second half of the year.

Shane Oliver, the chief economist at AMP, believes that property markets are at risk of another downturn, as price growth has already started to slow. Easing auction clearance rates indicate that housing demand is struggling to keep up with a better supply of listings, as well as stretched affordability due to higher mortgage rates and cost of living pressures.

Under these conditions, AMP’s economists predict that national home values could fall anywhere between three and five percent in 2024. Sydney and Melbourne are considered to be more at risk due to higher debt levels, while Adelaide, Brisbane, and Perth are expected to remain relatively stronger, benefiting from lower listings, interstate migration, and lower debt levels.

In summary, the Australian property market is experiencing a more subdued pace of growth, indicating the impact of affordability constraints. While some cities and regions have seen consistent growth, others, such as Melbourne and Sydney, have experienced a slowdown. Economists predict another potential downturn in 2024, with factors like higher interest rates, poor affordability, and increased supply contributing to this outlook.

For more information on the Australian property market, visit https://downunderrealty.com.