2023 Year In Review & What We Can Expect For 2024
Amidst 5 rate rises (125bp), skyrocketing rents up 9.1% and vacancies reaching a record low of 0.8% – it’s fair to say 2023 was a turbulent year.
As we enter the new year, several positive projections are forecasted for the months ahead, including rate cuts, increased housing demand from population growth and growing rents reaching their highest point – the PERFECT storm for investors.
Let’s take a deep dive in the year that was, and what’s on the horizon for the 2024 property market.
2023: A Year In Review
- Australia’s property prices rose 8.1 per cent nationally over 2023, an unlikely upswing in the face of rising rates
– AllianceCorp averaged 12% growth in key markets - The largest uplifts were seen in Perth (15.2 per cent), Brisbane (13.1 per cent), and Sydney (11.1 per cent).
- Values across regional markets were up 4.4 per cent in 2023.
- Rents increased 9.1% across all capitals and 6% across combined regional areas
– AllianceCorp averaged 26% rental growth in key markets - Despite the mixed bag of results, national dwelling values remained 31.3 per cent above where they were before the COVID-19 pandemic
In 2023, data group CoreLogic’s home value index rose 8.1% nationally, lifting the national median price for a home to almost $758,000.
The biggest changes were seen across the capitals of Perth (+15.2%), Brisbane (+13.1%), Sydney (+11.1%) and Adelaide (8.8%).
Source: CoreLogic via The Guardian
Alongside this, average rents achieved a 9.1% increase YOY, averaging $600 among most capitals by the end of the year and $530 across combined regional areas – the most notable being Perth investment property (+17%), Melbourne (+14.6%) and Adelaide (+12%).
Source: Domain Rental Report (December)
During this same period, AllianceCorp defied national averages and achieved 12% price growth across the states of WA, SA and QLD and a HUGE 26% increase in asking rents, outperforming the market by 16.9%.
The rebound of the market in 2023 defied many predictions – particularly the rising interest rates and the unexpected leap of 510,000 in the 2022-23 fiscal year. With the turbulence now behind us, 2024 is looking bright for prospective investors!
2024: The Year Of The Investor
- House prices expected to rise 5-7% across the country
- Average rents expected to reach their tipping points
- Interest rate cut expected as early as June 2024
- Net migration numbers to achieve 250,000 in 2024-25
According to Domain, house prices are tipped to rise across the country by 5 to 7 per cent for houses, with the median house price in Brisbane and Adelaide expected to rise by 7 to 8 per cent, in Perth by 6 to 7 per cent and in Melbourne by 2 to 4 per cent.
Some of those driving forces include: population growth as post-COVID migration continues to drive housing demand; the desperate need for greater housing supply; and relaxed lending as calls to review the mortgage serviceability buffer become more heightened, which in turn, would accelerate buyers’ access to the property market.
Interest Rate Cuts:
AMP Chief Economist Shane Oliver predicts there will be three rate cuts in 2024, starting as early as June. However, he is firm on the stance that rates won’t decrease at the rate or as far as they had risen in recent years. He predicts the RBA will bring the cash rate down to 3.6 per cent by the end of the year.
In contrast, the Commonwealth Bank (CBA) is forecasting six interest rate cuts in 2024 and 2025. CBA’s Chief Economist, Stephen Halmarick, predicts the Reserve Bank (RBA) will start cutting interest rates in September 2024, reducing the cash rate by 0.75 per cent in total by the end of the year.
This would bring the cash rate down from its current 12-year high of 4.35 per cent to 3.6 per cent by the end of 2024, and down to 2.85 per cent by the end of 2025.
Since May 2022, interest rates have skyrocketed from a record low of 0.10 per cent to 4.35, adding $1,349 more per month to $600,000 mortgage.
With household pressures at an all time high, the predicted interest rate cuts will be crucial for consumer sentiment. Once we start to see interest rates being cut, it will inevitably trigger improved consumer sentiment, and once consumer sentiment starts to rise, increased housing activity is likely to occur. While it may be a relief for mortgage holders, it may very well be the catalyst for another price upswing – a sign for investors to get in before the herd and capitalise on the 2024 market boom!
Buyers Will Chase Affordability:
According to the Domain report, Australia’s median house price is now back at its peak of $1,084,855. Regional house prices have also hit a peak of $591,139.
Capital-city markets, including Brisbane, Adelaide and Perth, are also at record highs, and the remaining capitals are in recovery mode as well. Domain’s Dr Nicola Powell is predicting prices will lift even further across all capital city and regional markets in 2024.
“Buyers will be seeking affordable options and we are likely to see that pepper the market in 2024,” she says.
Federal and state incentives have also been created to help prospective buyers and first-home buyers to get into the market, including but not limited to the Home Guarantee Scheme, First Home Super Saver Scheme, Help to Buy Scheme as well as additional grants which will further fuel demand, Powell adds.
Population Growth:
Population growth is set to remain a dominant feature in the housing market in 2024 and will continue to drive prices up well into 2024.
According to ABS’ latest population report, Australia’s national natural increase was 106,100 and net overseas migration was 518,100 in 2023 – a major contributor to change in all states.
While population-driven demand is outstripping our current housing supply, Australia would still have a severe housing shortage if migration were to come to a halt.
The National Housing Finance and Investment Corporation (NHFIC) announced in 2023 that the nation is currently confronting a shortage of more than 106,000 dwellings as a result of high interest rates, soaring immigration and community opposition to new homes.
The National Cabinet’s goal to build 1.2 million new dwellings, commencing on 1st July this year is crucial to alleviate such immigration pressures. However, with only 164,200 homes approved for construction in the year to October 2023 according to the ABS, this is still 56,000 fewer than the target.
For any prospective or current investors, this creates the perfect opportunity for investors to capitalise on the skyrocketing demand and purchase investment properties to facilitate the severe housing shortage.
Rental Markets Continue to Soar:
While asking prices are unlikely to see big dips in 2024, the rate of price growth will slow in 2024 and conditions for tenants are forecasted to improve with more tenants renting for longer periods of time. With property prices expected to continue on their uphill trajectory, the rental market will likely see more tenants renting for longer, Domain’s report has found.
As of December 2023, Domain measured the combined capitals’ median rental price for houses at $600 a week, up a record 13.2 per cent over the year. It was also $600 a week for units, up 23.7 per cent.
In 2024, rental prices are forecast to jump 7 to 10 per cent nationally, with Perth clocking the greatest growth of an anticipated 10 to 15% increase in tenant costs.
There will be many favourable dynamics for investors in 2024, creating the perfect opportunity for current and prospective investors to capitalise on the Australian property market and accelerate their wealth creation. As Managing Director Jason Paetow says, ‘invest when you can next afford to’ as opportunity cost often results in greater loss by not taking action!
So if you’re looking to kickstart your investment journey and accelerate your path to wealth this year, request a complimentary consultation with one of our Senior Property Wealth planners by filling out the form below!