Australian Real Estate Market: A 2024 Outlook - Property Inc

Australian Real Estate Market: A 2024 Outlook

As the Australian property market navigates post-pandemic fluctuations, experts from The Property Tribune like Henry Thai are predicting significant shifts for 2024. The market, having experienced a rollercoaster ride of highs and lows, with interest rates hitting a low of 0.1% before soaring to 4.35%, is now poised for a transformative year. Retail and office sectors have suffered, while the industrial sector emerged as a standout amidst the chaos of changing work habits and consumer behaviors.

Predictions for 2024: A Year of Recovery and Opportunity

According to Knight Frank’s Australian Horizon 2024 report, the coming year holds promise, especially in the build-to-rent (BTR), student accommodation, and similar sectors. Chief economist and report author Ben Burston notes, “The sustained pressure of higher rates has put pressure on asset values… However, with more deal evidence now coming through… we expect the gap between sentiment and formal valuations to erode substantially over the next six months” (Henry Thai). This sentiment signals a clearer and more confident market landscape by mid-2024.

Burston further adds, “Higher yields act to reset the market and provide a more attractive entry point for investors, generating the prospect of higher returns” (Henry Thai). This perspective echoes historical trends where post-rate hike periods like those in 1994, 2000, and 2010 were followed by attractive buying opportunities and above-average returns.

Living Sectors and Inflation: New Focal Points

The report also highlights a growing investor interest in the living sectors, encompassing BTR, student accommodation, and retirement living. Tim Holtsbaum, Knight Frank’s head of alternatives, emphasizes, “The shift to living sectors is part of a wider shift… [offering] the ability to adjust rental income streams more quickly… in response to high inflation” (Henry Thai). This adaptability is crucial in a landscape where inflation and interest rates are key concerns.

The Future of Office and Industrial Spaces

The commercial property market is expected to experience divergent trends. Prime assets in office and retail are likely to see reduced yield shifts due to their income security and growth potential. In contrast, assets with higher vacancy risks will demand a higher premium. The industrial sector, benefiting from strong rental growth and tight supply, is predicted to continue its upward trajectory.

Sustainability and Development: Emerging Themes

Mandatory sustainability reporting, kicking in from the financial year 2024-2025, will bring new compliance challenges and opportunities. Furthermore, a slowdown in office development, influenced by rising construction and lending costs, points towards a potential shortage of prime office space later in the decade.

The Australian property market in 2024 is gearing up to be a landscape of recovery, opportunity, and strategic investment. With a focus on living sectors, sustainability, and a nuanced understanding of market dynamics, investors and stakeholders can navigate this evolving terrain with informed confidence. As Burston and Holtsbaum’s insights suggest, adapting to these changes will be key to leveraging the potential of the Australian real estate market in 2024.


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