2024 Housing Market Forecast
Experts anticipate a significant deceleration in national house price growth for 2024, projecting an increase of 4% or less, a stark contrast to the remarkable 8% gains observed in 2023.
Despite the surprising rebound in house prices nationwide, driven by factors such as a record migration surge and low inventory levels, the momentum is expected to slow due to rising borrowing costs and affordability challenges.
While Sydney and Perth experienced notable increases of 11% and 15%, experts project a more subdued national growth range of 1-5%, with varying degrees of optimism and caution. The potential for an interest rate cut later in the year is seen as a factor that could reignite the market. The normalization of supply and demand dynamics in 2024 is anticipated to bring relief to first-time buyers and support the development of new housing. Barrenjoey's chief economist, Jo Masters, foresees 4.8% national growth, highlighting the re-emergence of borrowing capacity as a significant demand constraint and identifying a potential upside risk if housing supply recovery is slower than anticipated.
In December, prominent cities exhibited signs of a slowdown in the growth of house prices. Sydney's upward trend lost momentum, with prices increasing by a mere 0.2% and a modest 0.8% in the final three months, contrasting sharply with the 4.5% surge in the three months up to May. Melbourne, facing its second consecutive month of losses, saw a 0.3% dip in December. Oxford Economics' senior economist Maree Kilroy, projecting a 2.7% gain in 2024, observed a decline in key factors that fueled last year's growth, such as auction clearance rates and monthly price increases. Affordability challenges and an enduring dwelling shortage are anticipated to curb growth, particularly for houses. The forecasting of 2024 property prices is marked by heightened uncertainty, as acknowledged by AFR Weekend panelists. Jarden's Mr. Cacho predicts a 5% national price increase, emphasizing the influence of housing supply on prices. Nicola Powell, chief of research and economics at Domain, underscores the unpredictability, citing factors like population growth, supply shortages, and interest rates contributing to the uncertain outlook.
Despite challenges related to affordability and constrained borrowing capacity, several experts hold an optimistic outlook for house price growth in 2024. Dr. Powell forecasts a robust 6 to 8 percent increase in house prices and a 2 to 3 percent rise in apartment values, suggesting that stimulus measures or a potential interest rate cut could fuel demand and trigger a price upswing later in the year. Ray White chief economist Nerida Conisbee shares this optimism, expecting price rises to potentially surpass those of the previous year, driven by low housing supply and the prospect of a rate cut in the first half of 2024. Employment is identified as a crucial factor influencing house prices, with varied predictions among experts. While some, like Australian National University associate professor Ben Phillips, foresee a sluggish 2024 with a 4 percent national gain, others, such as CBRE chief economist Sameer Chopra, anticipate more subdued job growth and potential price tempering before late-year rate cuts. Knight Frank chief economist Ben Burston and PropTrack's Cameron Kusher also project a 4 percent national gain, with the expectation that rate cuts will influence buyers' decisions in the second half of the year. However, AMP chief economist Shane Oliver holds a bearish view, suggesting a potential 3 to 5 percent national price decline in 2024, with varying impacts across cities. SQM Research founder Louis Christopher anticipates a "moderate correction" in Sydney and Melbourne, forecasting a weighted national average between negative 1 percent and positive 3 percent in SQM's base case.
Source: https://www.afr.com/property/residential/house-price-growth-to-slow-to-4pc-as-rates-bite-20231228-p5eu1b