2023 is winding down. And as we get ready to step into 2024, many of our clients want to understand what the new year will bring in the property space. Should we buy? Should we wait? Will interest rates rise?

As the real estate landscape continues to evolve this presents new opportunities as well as new challenges for home buyers. Understanding the dynamics of this changing market is important for making informed decisions, and having the most success in your property journey.

So let’s dive into trends that will shape the Australian real estate market in 2024.

Forecasting the 2024 Real Estate Market: Insights for Home Buyers

There are many ways you can look at the future of real estate. Here we’ll categorise the trends in three ways:

1. Market trends
2. Economic trends
3. Investment trends

1. Market trends

Pricing predictions

The past few years have felt like a tumultuous period in the Australian real estate market. This has been particularly true off the back of increased immigration after Covid and stronger demands for established homes because of disruptions in the construction industry. However, house prices have continued to steadily grow despite multiple cash rate rises over the past two years taking our current cash rate to 4.35%, the highest it’s been since 2011.

Nationwide house prices rose by 10.77% in 2022. And in 2023 house prices continued to grow steadily, with a national annual growth rate of 5.42%. This is expected to continue in 2024, with expected growth in house and unit prices of around 5 to 7%.

Of course continued growth could be impacted by Australia’s economic pressures, such as continued population growth, financial stressors that could weaken demand and the undersupply of new homes.

We would continue to expect that prices in major cities like Sydney, Melbourne and Brisbane would generally see more growth than regional areas due to continued demand. However in November of 2023 prices in Melbourne actually fell (by -0.1%), and Sydney remains weak. Adelaide and Perth are the standouts for 2024 with sales volume 25% higher than historic five year average.

If you’re looking for a good deal, the emerging markets in smaller cities and regional areas are likely to offer more affordable options, but keep a close eye on the capital cities. This could be an excellent opportunity for first-time buyers to enter the market.

Interest rate outlook

The cash rate currently stands at 4.35% as of the last Reserve Bank of Australia’s (RBA’s) announcement on 5 December 2023. We can expect a reprieve from any potential interest rate rises now until February since the RBA won’t meet again until then.

We may see two different years in terms of performance, with the first half showing weaker performance while home buyers wait to see what the RBA will do in terms of the cash rate. If the RBA does ultimately lower interest rates – which is possible – then this could lead to a recovery in buyer demand, and raise housing prices.

However, if the trend of rising interest rates continues as a measure against inflation, it could impact borrowing costs. Prospective buyers should keep a close eye on this trend and perhaps consider locking in fixed-rate mortgages to mitigate the risk of fluctuating interest rates.

Supply and demand dynamics

The balance between supply and demand will be a key factor in 2024. Most experts continue to see demand for housing outstripping supply here in Australia. However, supply is increasing with new listings rising as well as an increase in stressed sales.

To counteract this supply problem, the National Cabinet has set a new target of 1.2 million new homes over the next five years. This initiative will begin on 1 July 2024. This is on top of the 200,000 new homes that were already agreed to by the states and territories last year.

An increase in new housing developments might shift the property market towards a buyer's market. This could lead to more competitive pricing and greater choices for buyers.

2. Economic factors

Economic growth and employment

The overall health of the Australian economy, including GDP growth and employment rates, will have a direct impact on the real estate market. To date Australia’s economy has been fairly resilient. However, growth is expected to slow to 1.25% in 2024 due to tighter government policies and financial conditions. Experts also expect unemployment to remain low.

A strong economy typically boosts buyer confidence and purchasing power. This is something to keep an eye on as it could lead to increased demand for housing.

Immigration and population trends

We expect strong immigration – particularly in capital cities such as Sydney, Melbourne and, to a lesser extent, Brisbane – to continue in 2024. This is forecast to be about a quarter of a million in 2024-25, which is about pre-Covid levels driven mainly by international students. This will have a direct impact on the demand on housing in those areas which could impact the real estate market.

Population also continues to grow in all states and territories, a factor which can also lead to higher demand across the board.

3. Investment trends

Location, location, location

We expect that prime locations will remain the most sought after property investment opportunities in 2024. This will be inner city locations, or those close to universities, for example. Because these areas are naturally limited, this will increase demand and likely prices over the year. However it also means that investment returns will remain high in those areas.

Rental market

The cost of living shows no signs of decreasing here in Australia and this includes rental prices. Experts predict that rental prices could rise by 30% over the next five years which could be a good opportunity for property investors. With home buying remaining challenging, more people will be turning to renting, and that means that rental demand will continue to rise.

Sustainability and green living

Most consumers in Australia are growing more and more aware of environmental issues. Because of that properties with sustainable features and green credentials are increasingly in demand.

Embracing these elements in your investment properties could see you not only contributing to a healthier environment but might also seeing more return on your investment.

Is it time to buy your next property?

The 2024 real estate market in Australia presents a unique landscape for home buyers. There are challenges, but also fantastic opportunities, particularly when it comes to investment properties.

Staying informed about market trends, economic factors and investment trends will be key. But we’re here to help! At Lending Loop, we’re committed to helping you turn your home-buying dreams into reality.

With the right approach and some expert guidance, 2024 might just be your best property year ever. Get in touch and let’s talk about your options for 2024!