Some property economists have predicted sustained growth in property prices in 2024, with Domain forecasting an increase nationally of between 5% and 7%.
Factors putting upward pressure on the market
1. Population growth
Australia’s population grew 2.2% over the year between March 2022 and March 2023, the highest in 15 years, according to the Australian Bureau of Statistics (ABS). This was largely due to high numbers of overseas migration. More people need more places to live, increasing demand.
Forecasts show the population will continue to grow, at an estimated rate of between 1.2% and 1.7% until June 2032, putting further demand on the housing market.
2. Limited supply
Building approvals have slowed to 6.1% less than this time last year according to the ABS. Rising costs of labour and materials have also made it difficult to build new homes. If this trend continues, there simply won’t be enough new homes to house the growing population.
3. Potential rate cuts
After 18 months of increases, the Reserve Bank of Australia (RBA) is expected to cut interest rates in 2024, making it more affordable to secure a mortgage.
4. Lending standards
Some lenders have lowered their mortgage serviceability buffer to allow more people to secure finance for homes.
Factors putting downward pressure on property prices
While the above factors are compelling, there are two possible aspects that could add downward pressure to property prices.
1. Stretched affordability
With property prices already at record-highs in many markets, it is becoming harder for people to afford to buy homes. There is the possibility that this could lead to a decline in demand for housing.
2. Weakening economy
The RBA has forecast economic growth will remain slow in 2024. “GDP growth is expected to be below trend over the year ahead. This is mainly because of subdued growth in household consumption as cost-of-living pressures, higher interest rates and higher tax payable all continue to weigh on disposable incomes for a time. Inflation is past its peak and heading in the right direction, but it is likely to return to target a bit more slowly than we previously thought,” said RBA acting assistant governor Marion Kohler.
The case for 2024
If population growth remains strong and building approvals continue to decline, demand in the market should be firm and likely to put upward pressure on property prices. Lending practices and potentially lower interest rates will help carry some of the load, helping increase access to finance and affordability.