Australian Real Estate: A Mixed Outlook for 2024 and Beyond - Property Inc

Australian Real Estate: A Mixed Outlook for 2024 and Beyond

The Australian housing market, after experiencing a surprising recovery in 2023, is poised for a more subdued growth phase in 2024, according to Oxford Economics. Despite last year’s record highs driven by a lack of new housing stock and a surge in population growth, the momentum is expected to ease, with a forecasted national home price growth of just 2.7% in 2024. This comes on the heels of an 8.1% surge in 2023, as reported by CoreLogic and analyzed by Maree Kilroy, senior economist at Oxford Economics Australia. The cooling off is attributed to several factors, including rate hikes, persistent cost-of-living pressures, and a worsening affordability crisis that is especially impacting the housing market.

However, the outlook isn’t uniformly grim across the country. Sydney, for instance, is set to defy the national trend with a predicted strong growth trajectory for home prices. According to James MacSmith’s article, Oxford Economics forecasts a substantial increase of up to 23% for Sydney home prices over the next three years. This growth is expected to be more pronounced in the unit market, which could see prices soar by 23.4%, pushing the median unit value past the $1 million mark. The median house price in Sydney is also expected to breach the $1.5 million threshold, a significant leap from current levels.

Kilroy points out that deteriorating housing affordability will continue to be a significant factor in moderating the pace of growth, particularly for houses. Yet, she also notes that a significant shortage of homes is likely to persist across the country, which could place a floor under prices. “Even with the current softening, the structural shortage of housing will continue to underpin the market,” Kilroy stated, highlighting the complex dynamics at play in the Australian real estate sector.

The diverging paths of the national and Sydney housing markets underscore the varied factors influencing real estate across Australia. While overall growth may be muted, specific areas like Sydney are poised for significant gains, driven by unique local dynamics, including low levels of advertised listings and pockets of affordability that are expected to prop up prices in the near term. Moreover, the anticipated interest rate cuts from late 2024 are expected to boost credit availability, potentially accelerating broad price growth once again.

In Sydney, the relatively cheaper price point of units compared to houses is expected to support stronger growth in the near term. This trend, coupled with policy moves by the Albanese Government, such as increased taxes for foreign purchases and a doubling of the vacancy fee for homes owned by overseas investors, is likely to have a targeted impact on the Sydney real estate market, particularly in high-end postcodes.

As Australia navigates through these changing dynamics, the real estate market continues to be a focal point of economic discussions. The mixed outlook for 2024 and beyond reflects the intricate balance between supply and demand, affordability issues, and policy interventions, all of which will shape the future of housing in the country.

References:

https://www.businesstimes.com.sg/property/australian-house-price-growth-be-muted-2024-oxford-economics 

https://www.realestate.com.au/news/sydney-home-prices-to-skyrocket-by-23-per-cent/ 

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