Soaring Aussie House Prices: A Deeper Look into 2024’s Property Market

The Australian property market is poised for a significant shakeup, with house prices set to surge by an estimated 15 per cent over the next 18 months, as predicted by KPMG’s recent report. The future trajectory of property prices has been the topic of fervent debate, especially as the nation grapples with post-pandemic recovery and the implications of varying interest rates.

According to KPMG’s Chief Economist, Dr Brendan Rynne, constrained supply remains a dominant factor in escalating property prices. “Despite high interest rates, constrained supply will likely dominate the factors influencing property prices in the short term and result in continued price gains in most markets during FY24,” Dr Rynne stated. This viewpoint is mirrored by property analyst Miriam Sandkuhler, who observed inconsistent price trends across the country, influenced significantly by the effects of rising interest rates.

One noteworthy insight from KPMG’s report is the forthcoming pressure on housing demand due to post-pandemic immigration recovery. The report predicts a 4.9 per cent rise in house prices over the next nine months, followed by a 9.4 per cent surge in the subsequent year. This rise is not uniformly spread, with units in Sydney, Melbourne, and Hobart likely to witness larger gains than the national average in the forthcoming two years.

Meanwhile, Sandkuhler offers a different perspective, pointing towards the larger cities like Sydney and Brisbane experiencing solid growth, while Melbourne emerges from stagnation and smaller capitals such as Hobart, Darwin, and Canberra falter. She also highlights the influence of cashed-up buyers, particularly Baby Boomers, in driving property growth in specific areas. Despite this trend’s prominence, Sandkuhler anticipates it to diminish in the coming year.

An intriguing facet of the property discussion is the rental market. Sandkuhler states, “the residential market remains primed for significant rental growth”. She cites historical data to substantiate her claim, pointing out that rents surged from their 15-year average growth of 3.5 per cent to 6.7 per cent over the past year. Sandkuhler predicts this growth to reach double digits in 2024.

However, it’s not all smooth sailing. Challenges persist, such as the mortgage cliff where borrowers transition from low fixed rates to higher variable rates. Dr Rynne voiced concerns over this, noting that first-time buyers now expend approximately half their earnings on mortgage payments, a marked increase from a third merely three years prior.

In conclusion, while the Australian property market’s trajectory remains uncertain, indicators from leading experts hint at a dynamic period ahead. As Sandkuhler aptly summarized, “While the overall number might not look that great, below the surface the dynamics will be fascinating”.

References:

“Aussie house prices ‘set to soar 15 per cent’: KPMG” by Taylor Troeth. https://www.realestate.com.au/news/house-prices-set-to-soar-kpmg-reveals/

“Where property prices are likely heading in 2024, and why” by Miriam Sandkuhler. https://www.apimagazine.com.au/news/article/where-property-prices-are-likely-heading-in-2024-and-why