Just as 2023 defied the forecasts of economists and news media, delivering solid price growth in most jurisdictions, 2024 will do better that the pessimistic predictions that emerged recently.
Those who predicted significant price decline for 2023 and 2024 have something in common: they all believe the biggest factor is interest rates. In the simplistic mindset of bank economists, movements in interest rates dictate what will happen with dwelling prices.
History has shown this is false and 2023 provided further confirmation. There were multiple increases in the cash rate but prices continued to increase in most major markets, proving there were more powerful forces driving prices.
Those elements can be distilled to one word: shortage. The Australian housing market has shortages of everything that matters: we have been building too few new dwellings, there are too few homes listed for sale and there’s an undersupply of rentals. The shortage factor has been exacerbated by high population growth, turbocharged by record levels of overseas migrants.
And, as we consider prospects for 2024, there are no remedies in sight. The building industry has myriad problems and can’t produce homes fast enough. All levels of government, but state governments in particular, stymie development with restrictive taxes and red tape which slows everything down. Policy changes are invariably detrimental to investors which deters the cohort that supplies 90% of the homes people rent - and that worsens the rental shortage.
The other big factor that will impact 2024 is the steady rise in buyer activity throughout 2023. The year began with weak markets in Sydney, Melbourne and Brisbane, as well as regional NSW, Victoria and Queensland. But as the year evolved, sales activity picked up steadily until, by the September Quarter, these markets were pumping strongly.
This is the momentum that will create a strong start to 2024 in those key cities and regional areas.