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.
To address the housing supply shortfall, national cabinet announced a target to build 1.2 million homes over five years, but it seems unlikely it will alleviate any pressure immediately.
What could drive Australian property prices up in 2024:
Population: Unprecedented post-COVID migration and population growth will continue to send shock waves through the property market as a booming population looks for a place to live. It will continue to exert extraordinary upward price pressures on the property market.
Supply: Given Australia’s slowing housing supply in the face of a bigger Australia, the extremes of a supply shortfall will exert upward pressures on the housing market.
Relaxed lending: Given high inflation and interest rates, there are calls to review the mortgage serviceability buffer (currently 3 per cent). If this buffer is reduced, it will speed up access to the property market for many by lifting borrowing capacity, increasing demand and resulting in swift upward price pressures on the housing market. This, together with the prospect of a cash rate cut in the latter half of 2024, would most likely signal a further gear change in property price.
What that could push Australian property prices down in 2024:
Affordability: 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.
Rising unemployment: RBA expects unemployment to rise as inflation slows down. More unemployment will mean greater uncertainty, fewer loan approvals, delayed demand, and greater inequality in Australia.
Inflation: If inflation sticks around for longer, further rate rises, or high rates for longer, could push more mortgage holders into financial stress and listings higher, particularly from investors who are quicker to offload properties than an owner-occupier. Rising inflation will also cut affordability and limit buying power, reducing, or limiting property demand.
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