The dynamic world of property investment is full of predictions, speculation, and, at times, stark realities. Australia’s housing market, which has seen a dramatic 7% rise since 2023, is a prime example. While some sensationalised headlines foresaw a catastrophic 25% to 30% downfall, the evidence-based forecasters – with their meticulous analysis of variables – expected a 7% slump, followed by a gradual upswing. Yahoo Finance provide a comprehensive analysis of Australia’s housing market in easy-to-understand terms for potential property investors.
Breaking Down the 2023 Predictions and Outcomes
In 2023, numerous prophecies foretold of a deep and extended house price collapse. Numerous reports suggested that prices could tumble by as much as 30%, turning an $800,000 dwelling into one worth merely $560,000. This prediction was influenced more by a desire for sensational headlines than concrete analysis.
In contrast, credible forecasters carried out a sober assessment of the factors influencing house prices. They predicted a 7% decline, followed by a recovery phase in 2023, leading into 2024.
The outcome, as shown by Corelogic data, matched the forecasts of the grounded analysts. House prices did face a 7% decrease, but the prices began to surge again in early 2023. Several factors, such as the reopening of international borders, pent-up demand, a shortage of houses on sale, a strong labour market, and rising construction costs, contributed to this rise.
As the year ended, Australian house prices rose by an average of 7% since early 2023, a record for the time. This left those who predicted a fall in prices largely silent, their hyperbolic forecasts largely forgotten.
A Cautious Outlook: House Prices Expected to Stabilise
Going into 2024, the factors driving the property market indicate a potential slowdown in price growth. The nation-wide monthly growth is more likely to vary between 0% and 0.5%, rather than the 0.5% to 1% monthly increases seen previously. The year-on-year rise in house prices for 2024 is projected to be around 4%, indicating a visible shift from nearly 10% in 2023.
There are various factors at play behind these predictions:
Housing Supply and Demand Dynamics
There has been a noticeable rise in new house listings over the recent months, and buyers now have substantially more options than they did a few months ago. Moreover, the initial surge in demand following the reopening of Australia’s borders appears to be levelling off, leading to a more balanced market.
Unemployment and Labour Market Conditions
As the labour market softens, unemployment rates are expected to rise from the 2022 low of 3.4%, potentially reaching 4.5%. Banks, who regularly stress-test their mortgage portfolios, indicate that a weaker labour market can negatively impact their balance sheets, leading to increased bad and doubtful debts from housing.
Construction Cost Inputs
In addition, easing inflation is causing building material costs to stabilise, and the shortage of construction workers is also improving. These occurrences should aid property developers in ramping up new construction, though these effects will likely be more noticeable in the long run.
The Bottom Line for 2024
Analysing the above factors leads us to anticipate a moderation in the house price cycle in 2024. Nationwide house prices are poised for a moderate annual growth of around 4%, with certain areas potentially experiencing slight drops.
Any mention of a seismic crash in housing prices appears far-fetched unless unemployment levels dramatically increase past 5% or there are unexpected cuts to immigration levels. The outlook seems to be one of cautious optimism, with an alignment of various contributing factors suggesting that the Australian housing market, in general, is moving towards a period of price stabilisation.