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Warning and major changes: 5 things to know about 2024 Australian housing market

Will property prices rise? Will rents go down? How can I get into the market? We answer your 2024 questions.

Record-breaking was a hot descriptor for Australia’s property market in 2023, the year now described as the one that “surprised everyone”.

You have no doubt read about the aggressive rate hikes, the pressure on mortgage holders, dwindling supply and the spiralling rent crisis pushing more Aussies to homelessness. So, approaching the end of the year, surely you’re wondering what 2024 has in store.

Domain has released its outlook for the next calendar year and Yahoo Finance chatted to leading property expert and Domain's chief of research, Dr Nicola Powell, about what you can expect, and a snapshot of the year that was.

A valley with rental properties on one side and for sale houses on the other, with people trying to bridge the divide.
Australia's housing market will change again next year, so will property prices go up? Will rents come down? And how can people bridge the divide? (Credit: Yahoo Finance)

1. Will property values go up in 2024?

Yes and no but it won’t be “boom-time scenarios”. It’s more likely to come at the back end of the year and depends on a couple of factors, like where you live and whether the Reserve Bank (RBA) decides to hike rates.

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“Some of our markets, like Melbourne, aren't actually going to see much growth. The cities that are leading - Sydney, Perth and Adelaide - we are predicting between 6 and 9 per cent growth in so that’s not a boom-time market at all compared to what we saw during COVID-19, which was ‘once in a generation’,” Powell said.

She said there'd been a call for the serviceability buffer - the 3 per cent banks want borrowers to have when taking out a mortgage - to be dropped. If that comes to fruition, along with a rate drop, borrowing capacity will increase and help push prices up.

Help me understand

What could push prices up?

  • A rise in population, fuelled by migration, means more people are looking for somewhere to live, with a shortfall in supply pushing prices up

  • Lending restrictions relaxing

What could push prices down?

  • People just don’t have the money as wages lag, the general cost of living remains high and inflation pushes more into mortgage distress

  • More people losing their jobs

2. Will rent prices come down next year?

Affordability: Powell predicts the rental market reaching a “tipping point”. In theory, this might sound great because prices will have to drop, but the reason is pretty sad: people simply won’t be able to afford it.

Some will have to move into share-house situations, which could mean renting a four-bedder with your mates, or losing some independence and moving back in with your parents. Share housing can be more challenging for vulnerable groups like parents or older people and there is a big risk of “under housing”, where people don’t have a home that suits their needs, like enough bedrooms for their kids.

“Stretched affordability is going to continue to plague the rental market so people will consolidate homes to cost cut ... this will slow down rental growth and some submarkets will help balance rental conditions."

Migration: High migration numbers have been blamed for constricting an already-tight rental market further, but Powell says that trend won’t continue because most have already secured a place to live.

“We are getting past that peak, which will give the rental market a bit of breathing room,” she said.

Renters become buyers: Many tenants feel at the mercy of landlords and that power imbalance causes serious anxiety. This, coupled with cost pressures, will actually “fast track” some to make sacrifices (like moving home, or to “less desirable” areas) to get onto the property ladder so they can take control of their lives.

“A lot of renters have just gone well, ‘We need to break into the housing market or we're never going to catch up’ and that’s the mentality many people now have,” Powell said.

3. Young people: Potential opportunity for first-home buyers to strike

A lot of younger people have been disproportionately impacted in the housing crisis, getting trapped in renting for longer following a boom that priced them out of the market. The cycle continued as interest rate rises trickled down and were reflected in record-high rents, further pushed by record-low vacancies.

But Powell said 2024 would be a year of opportunity as “mortgage stress weighs in, and cashed-up buyers benefit from landlords divesting early in 2024”.

“We are also seeing policies being steered towards the younger demographic and what we'll see is greater support for first-time buyers gaining access to the market.”

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New cash incentives: First-home buyers will be able to leverage government subsidies to reduce the amount they will need for a deposit, or taxes related to purchasing.

“A great example of this is Queensland doubling the first homebuyer grant from 2024,” Powell said.

“Help to Buy is also meant to come to fruition next year and that’s another policy that will drive demand for first-home buyers in entry-level-price property."

Help me understand

What is the Help to Buy scheme: A ‘shared-equity scheme’ the government is trying to have up and running next year. It will allow low- and middle-income earners to co-buy a home with the government with just a 2 per cent deposit. There are price and income caps to get the 40 per cent (for new homes) or 30 per cent (for existing homes) equity contribution. There are also lower ongoing repayments while they take part.

You can see a breakdown of every first-home buyer grant and scheme at our explainer here.

But there are risks to financial incentives.

“I'm not a fan of financial incentives for first-home buyers to gain access to the market because it does push up property prices," Powell said. "The more affordable property prices will increase at a greater rate. Units and lower-entry houses will continue to rise because first-home buyers want to take advantage of the cash incentive.”

But no amount of grants or cash boosts will help if Australia can’t achieve one goal.

“We really need to see more affordable houses,” she said.

4. What could solve Australia’s housing crisis?

The short answer is supply. Powell said Australia needed a ‘visionary approach’ to planning reforms that would help create more affordable housing in our cities. She proposed tweaking planning reforms away from local governments to avoid “decision-making sway" from locals with a "not in my back yard" mentality.

“We need to see more affordable housing, we need to think differently. Supply takes a while and it is challenging but we really need to have strong reforms and an approach to planning for our cities to be providing housing for future generations, not just building today for yesterday," she said.

Powell said this would mean building the types of homes people wanted to live in in places people wanted to live.

"Think about the ageing population, more of us want to age in our homes and stay in our suburbs but how can we unlock those larger family homes and encourage people to downsize when there’s nothing out there to suit their needs?"

Powell said the $10 billion Housing Australia Future Fund and its target to deliver 30,000 new affordable houses was the “north star” we absolutely needed to aim for but, given how the rental and property market interplay, there was more that needed to be done to secure the homes of more Aussies.

“We also need to think differently about our rental markets and consider that more of us are renting for longer. We should be offering longer-term leases, we should be giving security of housing for people who are renters.”

5. Space matters and it’s likely you’ll be sharing it

The 2023 property report trend found people wanted granny flats. I can get the appeal, having one almost guarantees you have a backyard and that can be a step up in space from many living in apartments.

“I really think that that showcases the tightness of the rental market," Powell said. "It also shows people want an area to work from home, or an increase in intergenerational living, or it could be that people are just trying to find other ways to have income and the potential to Airbnb or, you know, short-term leasing or rent it out.”

CoreLogic agreed, even claiming granny flats could be an “immediate and cost-effective” solution to the housing crisis, delivering much-needed housing supply within existing town-planning guidelines.

“For a house worth $500,000, the addition of a granny flat has the potential to add approximately $160,000 to the value of the property,” research director Tim Lawless said.

Here are 15 suburbs across Australia ripe for development.

Snapshot: Australia’s property market 2023

Where were people overseas looking at property? Melbourne was the most searched. The rest were in Sydney - specifically Mosman, Surry Hills and Chatswood.

Biggest sale of the year: A sprawling trophy home in the affluent Sydney suburb of Bellevue Hill that overlooks the harbour and has been described as one of the nation’s grandest homes. Price tag: $70m

Why was 2023 ‘surprising’? Property prices were not expected to grow because the aggressive cycle of rate hikes impacted Aussies’ borrowing capacity. But a shortfall in supply, a migration-fuelled jump in population and a tight construction sector allowed the market to “defy logic”.

Have we recovered from the 2022 downturn? Brisbane has hit its peak, Sydney is closing in on a new record, while Adelaide and Perth house prices are at an all-time high. Canberra, Hobart and Darwin are still in recovery.

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