Source : Australia Financial Review | Written by : Campbell Kwan and Nick Lenaghan

In a recent survey, a panel of economists and analysts shared their predictions for the property market in 2024, and the consensus is clear: property prices are expected to rise by as much as 7% nationally. This anticipated growth is driven by several factors, including a quicker-than-expected recovery in the housing market and a relative scarcity of property listings combined with a resurgence of buyers.

According to data from CoreLogic, home values have already increased by 6.3% in the six months leading up to September, demonstrating remarkable resilience during one of the fastest rising rate cycles in three decades. This remarkable momentum has led experts to project continued growth in house prices throughout the 2024 financial year.

Jarden chief economist Carlos Cacho is among those who foresee a 6.5% increase in house prices nationally for 2023-24. However, he expresses some caution, as this growth might not be entirely sustainable or backed by fundamental economic principles. The key drivers behind this expected surge are the limited availability of listings, particularly family homes, and the positive sentiment toward housing, fueled by expectations of Reserve Bank of Australia (RBA) easing in the upcoming year.

It’s important to note that experts don’t anticipate RBA rate cuts until late 2024 at the earliest, which could potentially challenge the current positive sentiment in the housing market.

The Reserve Bank of Australia has been closely monitoring the housing market’s turnaround, which has brought prices close to the peak levels of April the previous year. The RBA’s observations suggest that the strong recovery in the established housing market might provide support for household consumption in the near future.

However, there are potential headwinds that could slow down this growth. Stronger-than-expected Consumer Price Index (CPI) figures have raised expectations that the RBA might implement further rate hikes before the end of the year. Higher borrowing costs could potentially dampen house price growth.

Economists Jo Masters and Shane Oliver expect property prices to increase by 6.6% and 7%, respectively, throughout the 2024 financial year. While low supply is expected to bolster house price growth, experts also anticipate a slowdown in the pace of these price increases. This slowdown could be driven by factors such as high-interest rates and rising unemployment, which could constrain demand and potentially increase supply.

Louis Christopher of SQM Research is among the most optimistic forecasters, expecting Sydney house prices to surge by as much as 11% and Melbourne prices by 7%, mainly due to an anticipated surge in immigration this year. However, these forecasts are contingent on stable interest rates.

Cameron Kusher, PropTrack’s executive manager for economic research, predicts a 4% rise in house prices nationally and in Sydney, with the strongest growth in Perth at 7%. He also attributes the housing market’s strength to the rapid rate of migration.

Another noteworthy trend is the possibility of capital values growing more aggressively in the early and late stages of this cycle, as described by Sameer Chopra, CBRE’s regional research chief.
Ben Phillips, an associate professor at the Australian National University, anticipates the strongest price growth in Perth at 13% and Adelaide at 15%, emphasizing the robust economies in South Australia and Western Australia.

While the majority of economists polled anticipate rising house prices in capital cities, Oxford Economics’ Maree Kilroy stands out as the only one predicting a 1% drop in Melbourne’s market.

Despite these positive forecasts, some concerns remain. Two economists, Jo Masters and Ben Martin-Henry, caution that household savings will be eroded in the coming year. They also note that the number of fixed mortgages transitioning to higher rates in the latter half of the year will double compared to the first half. As a result, they expect that four in five households will have exhausted their savings by early next year.

However, experts generally believe that the rate of mortgage arrears will increase only modestly in the coming year, provided that a recession doesn’t occur. The strong labor market and substantial household savings buffers are expected to mitigate the impact of rising finance costs.

Overall, while economists are optimistic about the property market’s near-term future, they acknowledge the potential risks and uncertainties that could impact the trajectory of house prices in 2024.

Economists predict a 7% increase in property prices in 2024

In a recent survey, a group of economists and analysts shared their predictions for the property market in 2024, and the consensus is clear: property prices are expected to rise by as much as 7% nationally. This anticipated growth was driven by several factors, including a faster-than-expected housing market recovery and relatively low property availability combined with a resurgence in buyers.

According to data from CoreLogic, property values have risen by 6.3% in the six months to September, showing extraordinary resilience during one of the fastest interest rate rise cycles in three decades. This tremendous momentum has prompted experts to project continued growth in house prices throughout the 2024 financial year.
Jarden’s chief economist, Carlos Cacho, is among those predicting a 6.5% rise in house prices nationwide for 2023-24. However, he expressed some caution, as this growth may not be completely sustainable or supported by fundamental economic principles. The main factors behind the surge are expected to be limited supply, particularly of family homes, and positive sentiment towards housing, driven by expectations of Reserve Bank of Australia (RBA) easing in the coming year.

It is important to note that experts do not expect a rate cut by the RBA until late 2024 at the earliest, which could potentially shake the current positive sentiment in the housing market.

The Reserve Bank of Australia has been closely monitoring the turnaround in the housing market, which has brought prices closer to their April highs the previous year. The RBA’s observations suggest that a strong recovery in the existing housing market could provide support for household consumption in the near term.

However, there are potential obstacles that could slow this growth. Stronger than expected Consumer Price Index (CPI) figures have raised expectations that the RBA may have to implement further rate hikes before the end of the year. Higher borrowing costs could slow home price growth.

Economists Jo Masters and Shane Oliver expect property prices to increase by 6.6% and 7%, respectively, throughout the 2024 financial year. While tight supply is expected to support house price growth, experts also expect a slowdown in the pace of price increases This. This slowdown could be triggered by factors such as high interest rates and rising unemployment, which could limit demand and potentially increase supply.

SQM Research’s Louis Christopher is among the most optimistic forecasters, expecting Sydney house prices to jump by 11% and Melbourne prices by 7%, mainly due to an anticipated surge in immigration this year. However, this projection depends on the stability of interest rates.

Cameron Kusher, PropTrack’s executive manager of economic research, predicts a 4% rise in property prices nationally and a similar amount in Sydney, with the strongest growth in Perth at 7%. He also identified high levels of migration as one of the key supports for the housing market.

Another trend to watch, according to CBRE Regional Head of Research Sameer Chopra, is the prospect of more aggressive capital value growth in the early and late stages of this cycle.

Ben Phillips, an associate professor at the Australian National University, expects price growth to be strongest in Perth at 13% and Adelaide at 15%, emphasizing the strong economies in South Australia and Western Australia.

Although most economists are predicting a rise in house prices in the capital, Maree Kilroy of Oxford Economics stands out as the only one to predict a 1% fall in the Melbourne market.

While these predictions are positive, some concerns remain. Two economists, Jo Masters and Ben Martin-Henry, warned that household savings would be eroded in the coming year. They also noted that the number of fixed mortgages switching to higher interest rates in the second half of the year will double compared to the first half. As a result, they expect that four out of five households will run out of savings by early next year.

However, experts generally believe that mortgage delinquency rates will only increase moderately in the coming years, as long as a recession does not occur. A strong labor market and substantial household savings buffers are expected to cushion the impact of rising borrowing costs.

Overall, while economists are optimistic about the short-term future of the property market, they are aware of the potential risks and uncertainties that could impact house price trends in 2024.