08/12/2023
Market update:
The Australian housing market 2023:
Prices were supposed to go down, but they went up. What will 2024 bring?
This year has left many of us scratching our heads, questioning how – and why – property prices went up.
To say the property market took the nation by surprise in 2023 would be an understatement. We entered the year with forecasts predicting that interest rates would keep rising (they did) and house prices would keep softening (they didn’t).
The reverse happened. In the face of continued interest rate hikes, persistent inflation, and a deeply negative consumer sentiment, house and unit prices kept rising. In some cities, they posted some of their steepest price gains in years.
The regional median house price has hit a record $591,139, so how did house price growth defy interest rates? it should not have been fertile grounds for a price recovery.
The once-in-a-generation property boom of 2021 ground to a halt in 2022 as inflation surged to a 20-year high, and the Reserve Bank of Australia began lifting the cash rate.
A sharp downturn in most capital cities followed, amid talk of a looming recession. But this is Australian real estate. It is nothing if not endlessly surprising.
Prospective sellers were understandably cautious in the first half of this year, holding back on listing their homes for sale, but that scarcity of new listings fuelled buyer competition, unprecedented population growth following the pandemic, low unemployment and the extraordinarily tight rental market meant there were more buyers than sellers in the market, and so property prices went up.
Motivated by the price recovery and the belief that interest rates were close to their peak, sellers regained their confidence, winter became the new spring, with an influx of properties hitting the market at a traditionally quiet time. Domain’s report showed that new listings surged above the five-year average in August, especially in Melbourne and Sydney.
With property listings sitting at historic lows and the population surging, even rising interest rates could not keep house prices from rising in 2023. Over the past 18 months, mortgage holders have been slugged with 13 rate hikes, including five this past year, to lift the cash rate from 0.1 per cent to 4.35 per cent.
What’s the outlook for Australia’s housing market in 2024?
The property market outlook for 2024 is uncertain. Population growth and undersupply are expected to continue putting upward pressure on prices. Stretched affordability could weaken prices, wage growth has lagged behind home prices for some time, and higher interest rates have hit borrowing capacity. This combination will slow demand and exert downward pressures on prices unless incomes rise or mortgage rates fall, with that could push Australian property prices down in 2024:
Peter Gray
LREA
0416 202 333
