The market correction during 2023 was astonishing; home values increased despite multiple interest rate hikes. The shortage of property supply in Sydney drove the market cycle high for both sales and rentals. Home values rose by 24.5% in sales, and Sydney renters are now paying an average of $720 a week for houses and $680 a week for units.
The market correction was prompted as soon as the pandemic ended, despite the fastest recorded increases in interest rates. Whether or not growth can be sustained still largely depends on the supply and demand dynamic. The extensive impacts of interest rates on the market led to a period of stability, but there remains uncertainty around where the peak will be found.
The shortage of homes for sale, amid strong buyer demand in early 2023, saw the capital city markets return to growth sooner than expected.
High demand, fueled by the return of a large number of migrants, students, and foreign investors, is turbocharging the market. Many are opting to buy instead of rent due to the tight rental market and rising weekly rents.
Low unemployment is also underpinning market strength, along with high construction costs and skilled labor shortages. With fewer people building their dream homes, this created extra competition in the established housing market and pushed up prices.
For now, the prestige sector is leading the capital city market recovery. Exclusive buyers are usually less affected by rate changes, and expats are adding to demand, with the lower dollar exchange rate providing additional motivation to invest in Australia. The owner-occupier rates remain below the long-run average of 7%. It’s likely that the rate hiking cycle is almost over, as inflation consistently trends downward. This is providing impetus in many suburban markets where buyers are hoping to take advantage of new value following the correction.
What’s the outlook for property prices in 2024?
The bigger picture suggests that we’re at the peak of interest rate rises, and we are likely to see rate cuts in the second half of next year, from September.
The regions are also turning around after a lesser correction, due to strong ongoing interstate migration.
A ripple effect is now underway as some buyers look beyond the more expensive big coastal towns to nearby tree-change areas for better value. Migration will be a key factor driving growth in Australian property in 2024. International students are returning, and importantly, we’re opening the doors to more skilled migrants to close a very big gap in our labor market.
Australia is expecting 1.5 million migrants to move here over the next five years. Migrants have always favored Sydney and Melbourne but are increasingly appreciating what Queensland offers them.
For all your real estate needs in 2024, please consider our agency, with over 55 years of combined experience in navigating changing market conditions and achieving the best sale price possible.