It has been a remarkable turnaround for the Australian Real Estate market, as earlier forecasts of sharp falls in property prices have been proven wrong.
This recovery is unprecedented as the RBA raised interest rates by 4 percentage points in the past 14 months.
Here are five things you need to know about this key investor property haven as 2024 inches closer.
Significant Supply-Demand Imbalance Driving Property Price Surge
Alan Oster, NAB chief economist forecasts that property prices will continue to rise by around 5%, supported by population, rents, and labour market growth.
Among the cities expected to surge in property prices in 2024 include Brisbane, seen to go up by 6.5% and Adelaide, 6.2%. Property prices in Melbourne are seen to go up by 5.5% while Sydney properties are seen to rise by 5%.
Other factors driving the price growth are the record levels of net overseas migration as well as a housing shortage, according to PropTrack senior economist Eleanor Creagh. Annual overseas migration is expected to reach 260,000 in 2024 to 2025.
Melbourne is Top Destination for Offshore Property Seekers
Data from PropTrack reveals Melbourne as the top destination in Australia for offshore property seekers. This is primarily driven by a surge in rental interest from China. Victoria’s capital is the most searched location along with Torquay on the Surf Coast and Mulgrave suburb in the southeast.
Interest in Torquay has picked up because of the expats returning to Australia after living overseas for a long time. Torquay is near Geelong which is a thriving education and medical hub, and it also has Deakin university. Also, it’s just an hour’s drive away from Melbourne’s CBD.
Perth Outpaces Sydney and Melbourne
Perth has the lowest vacancy rate among state capitals at 0.4% in September according to SQM Research data. The national level is 1.1%. The median house value in Perth also reached a high of $646,700 in September, representing a 9% increase on the same time in 2023, according to CoreLogic.
Perth is also enjoying rapid population growth from overseas migrants and those from the eastern states leading to a surge in demand for rental and investment properties. According to the Australian Bureau of Statistics lending figures for August 2023, the value of property investment loans in Western Australia reached $827 million, the highest figure since 2015.
Rent Growth to Slow Down in 2024
CoreLogic Head of Research Eliza Owen believes rent growth will slow down in 2024. As Australian banks are forecasting a decline in the cash rate which could lead to a reduction in interest rates. This means increased investment demand which would boost rental supply leading to lower rent growth.
In addition, income growth is seen to soften in 2024 and overall economic demand is also slowing down thanks to a contractionary monetary policy. Unemployment also rose by 3.7% in July. RBA governor Philip Lowe forecasts the economy and employment to grow below trend and for unemployment rate to rise to 4.5% in 2024.
Supply Constraints Seen to Continue in 2024
Research from JP Morgan shows that there were many homes approved by authorities to start construction before and are still not completed. These total to around 50,000 to 60,000 homes according to analyst Tom Kennedy. The reasons for the delays are related to labour and material shortages, as well as building firms going bankrupt. This sizeable backlog in construction will continue to push rent and prices up.
Residential building approvals dropped steeply in July (-8.1%) and in June (-7.9%)