Surprising many property analysts, property prices bounced back in 2023 despite interest rate and cost-of-living rises, regaining all the losses of 2022. Annual property growth Australia-wide was just above 8%, close to the long-term average. In other words, it was ‘business as usual’.
While the rise wasn’t uniform across all real estate markets, this is easily explained by looking more closely at specific micro-economies and regions.
Over the last 40 years, we’ve seen relatively consistent performance of stand-alone house prices in capital cities. Any differences tend to be due to economic factors. Other factors include ‘the tyranny of distance’ with Perth and Darwin feeling the effects of their distance from major East Coast populations and the significance of the mining industry in their respective states.
As we get further into 2024, we are seeing more consumer confidence, fuelled by stabilising interest rates and the forthcoming tax cuts. However, we believe cost-of-living pressures and mortgage switching costs will force many prospective sellers to hold on to their properties.
To give you a broader picture, we have rounded up the views of some of Australia’s property economists for their predictions for the real estate market in 2024 and 2025.
Property forecast
While we’d like to be the oracle for house prices, we believe it’s wise to look to property experts and the Big Four banks for guidance.
Bank property price predictions
Interestingly, all four major banks have similar property price predictions. (If you’ve read their predictions for previous years, you’ll understand this is unusual.)
Property expert, Michael Yardney, has gathered the predictions from Australia’s four largest retail banks:
ANZ forecasts capital city property prices to lift 5-6% in 2024. Brisbane, coasting on the flow-on effects of their successful bid for the 2032 Olympics, is expected to show gains of 9-10%. Sydney prices should increase by 4-5% and Perth is the outlier with a range of 1-11%.
CBA is also tipping growth of 5% in capital cities, although the growth estimates are more conservative with Brisbane at 6% and Sydney capped at just 4%.
NAB has picked 5.4% as their figure for capital cities. They have an expectation of a 6.5% lift for Brisbane, 6.2% for Perth and Adelaide, 5.5% for Melbourne and Sydney at 5%.
Westpac appears to have the most confidence in the market for 2024, forecasting an average 6% growth for all capital cities. Perth is likely to be the winner with gains of about 10%, followed by Brisbane at 8%, Sydney at 6%, Adelaide 4% and Melbourne at 3%.
What economists are predicting
Despite the combined effects of rising interest rates and cost of living pressures, we saw consistent growth in almost all property markets. But what do the experts say?
Shane Oliver, AMP
Chief Economist Shane Oliver is predicting a 3-5% fall in home values in the first half of 2024 with an uplift in the second half of the year following interest rate cuts.
Oliver believes that interest rate rises have yet to be fully realised in mortgage rates and expects to see an increase in distressed sales as homeowners run through their savings or exhaust the ‘bank of mum and dad’.
Reserve Bank of Australia
The bank’s forecasts indicate that CPI inflation will fall from its peak of 7.8% in the last quarter of 2022) to 2.9% by late 2025. However, achieving this impressive goal could have detrimental consequences for employment, with unemployment tending to rise in line with inflation drops.
The housing market is forecast to cool. However, the limited supply should mean positive growth in housing prices in 2024.
SQM Research
SQM Research’s Louis Christopher is one of the more reliable predictors of house price changes. As of November 2023, Christopher’s research indicated capital city house prices could fall by up to 4% in 2024. His predictions are based on a scenario that includes a cash rate that ranges between 4.1% and 5.0%, population growth slowing to under 460,000 and unemployment rising to between 4.5% to 5.5%.
SQM Research predicts an increase in distressed sales, especially in NSW. The spectre of an energy crisis due to events in the Middle East could push the inflation rate back to the earlier peak of above 7% with the flow-on effects of rising unemployment and more interest rate rises.
Oxford Economics
While many welcomed 2023’s recouping of home price losses of the year before, the analysts at Oxford Economics take a conservative view and predict a softer year for home price growth in 2024.
Although Australia’s median home price hit an estimated new record of $939,000 in December 2023, external factors such as events in the Middle East that could lead to another energy crisis, war in Ukraine, the slowdown in building activity in China and a stalled Australian economy (that in 2023 was masked by population growth) could all lead to lower price growth.
From 2023’s figure of 8.1%, Australians should be prepared for growth of 2.7% in 2024, bumping up to 6.3% in 2025. Auction clearance rates, an indicator of the health of the property market, dropped towards the end of 2023. (However, 2024 so far has proven to be a busy year for auctions with relatively high clearance rates still.)
CoreLogic
The results of a recent survey canvassing over 1,400 real estate professionals reveal that the majority of respondents maintain a positive sentiment for the Australian economy in 2024. Of these, 57% expect some economic growth, while 59% believe home values will rise this year.
However, notes Eliza Owen, Head of Research, the market will grow at a slower pace than the 8.1% of 2023.
Opportunities in the current market
Relatively stable prices and interest rates offer great opportunities for investors and sellers alike. Sellers who wish to downsize and move to the regions or buy a smaller property will not lose when they’re selling and buying into similar markets.
Investors who are fully aware of their cash position, equity and tax stance can take advantage of stable/slowly rising prices to expand their portfolios.
Given the disparity between the banks’ and the property experts’ value predictions, we believe this is a year to hunker down, get the property basics right and set yourself up to thrive in 2025.
Can we help with your property needs?
Need help with buying or selling property in the Maryborough district in Victoria in 2024? Give us a call today.
