20 Dec 2023

From Defying Odds to Setting Trends: 2023 Wrap-Up and 2024 Property Market Forecast

The property market in Australia has experienced a year like no other in 2023. Despite expectations of rapid rate hikes and a downturn in price growth, the market defied logic and saw prices rise.

This surprising turn of events was driven by a combination of factors, including a shortfall of housing supply, rapid population growth, a strained construction sector, and the tightest rental market on record.

In this article, we’re going to look at the year that was and share some of the expectations for 2024.


Wrapping up 2023

A Scarcity of New Listings

The housing market in 2023 can be described as a year of two halves. In the first half of the year, there was a scarcity of new listings, which fueled buyer competition and led to steep price increases.

Many prospective sellers adopted a cautious approach, waiting to see the depth of the downturn and the impact of inflation and interest rates.

The construction sector also faced headwinds, with skills shortages, supply chain constraints, and cost pressures slowing down the completion of new homes.


Winter Becomes the New Spring

Dynamics shifted considerably in the second half of 2023 as sellers regained confidence in the market. Motivated by the pricing recovery and the belief that interest rates were at or close to a peak, sellers became active during what would traditionally be a seasonally quiet time.

This trend was particularly evident in Sydney and Melbourne, where new listings soared above the five-year average.  Although choice remained limited in Brisbane, Adelaide, and Perth, prices continued to increase, albeit at a slower pace than earlier in the year.


The Cliffhanger: Fixed-Rate Mortgage Refinancing

Between 2020 and 2021, rock-bottom interest rates led to a surge in fixed-rate loans, accounting for almost 40% of outstanding housing credit.

Refinancing of these ultra-low fixed loans, known as the "cliffhanger," peaked in the June and September quarters of 2023 and is expected to remain elevated into early 2024.

Despite the higher interest rates, the majority of borrowers have managed the transition, and mortgage arrears remain near historic lows.

Rising housing prices have provided support, increasing household wealth and reducing losses in the event of an urgent sale or default.


Gloom But Not Doom: Long-Term Confidence in Housing

Despite consumer confidence remaining notably pessimistic since mid-2022, the recovery in the property market demonstrates long-term confidence in housing as a stable investment.

Housing is perceived as offering security and a place to call home, which has contributed to the pricing recovery.

The undersupply of housing has become a prominent issue, with record house prices across the combined capitals and regions.

Low borrowing power and increased demand have put a spotlight on the need to address the housing shortfall.

The national cabinet has set a new target to build 1.2 million homes over the next five years to tackle this issue.


Property Market Predictions for 2024

In 2024, Brisbane's housing market is expected to see a notable rise in prices: houses are forecasted to grow by 7-8%, and units by 4-6%. These increases point to record highs for both types of properties.

Some buyers, sellers, and renters will proactively adapt to the lingering impact of the 2023 market movements and potential changes in the coming year. 

Here are 5 trends that are predicted to shape the property market in 2024.


1. An Interest Rate Cut Sparks Demand

Stretched affordability and lower borrowing power will continue to limit buyers' capacity to pay for a home. However, measures that improve this outlook for buyers are expected in 2024. 

An interest rate cut or other stimulus measures could spark demand and create another price upswing, likely to occur in the latter part of the year. 

Alternatively, an easing of the mortgage serviceability buffer could lift borrowing capacity and improve the cost of holding debt, increasing demand and resulting in upward price pressures on the housing market.


2. The Flight to Affordability

With the Brisbane property market set for growth in 2024, affordability is becoming more challenging for buyers. They're now looking towards less-known suburbs for better deals. 

To help with affordability, the federal government's 'Help to Buy' program will be a game changer for first-home buyers. Starting in 2024, this program will offer up to 40% shared equity in homes, making it easier for people to buy, especially in bigger cities.

Also, as Baby Boomers start thinking about early inheritance, this could give a boost to buyers' budgets, impacting what and where they buy.


3. YIMBYs Replace NIMBYs

2024 is predicted to be the year of progressive housing and planning reforms nationally. The not-in-my-backyard (NIMBY) mindset will shift to a yes-in-my-backyard (YIMBY) attitude, enabling urban densification in desirable areas. 

This may involve tweaking planning powers away from local governments to avoid decision-making sway from NIMBYism. 

The federal government's efforts to address housing affordability and facilitate greater entry for first-home buyers are expected to generate substantial activity in this regard.


4. Population-driven Housing Demand

Strong population growth will continue to drive the housing market in 2024. While net overseas migration is forecast to return to normal patterns by 2025, the recent temporary record strength in migration will continue to influence housing markets. 

Population growth has a cumulative longer-term effect on house prices, making purchasing more attractive and potentially shifting some renters towards homeownership. 

The challenges of securing a lease, coupled with a perilous rental market, will contribute to the appeal of buying a home.


5. Rental Markets Reach a Tipping Point

Australia's rental market has played a significant role in the housing market, with an increasing number of people renting for longer. However, a tipping point will be reached in 2024, with rent growth expected to slow and some sub-markets operating with a more balanced rental market. 

This will be driven by stretched affordability. More renters opting for house shares and first-home buyer incentives will help transition some renters to become owners or fast-track others to a more affordable purchase. 

As mortgage stress weighs in, cashed-up buyers will benefit from landlords divesting early in 2024.


Want To Maximise Your 2024?

As we gear up for 2024, the property market is brimming with potential. Expectations of growth, especially in Brisbane's housing sector, present exciting prospects. 

If you're aiming to leverage these trends or considering leasing your property, we're here to help. Reach out to us for expert advice and insights into navigating the promising year ahead.


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