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Affordability, rate cuts and densification are just some of the changes set to sweep Australia’s housing market in 2024, according to Domain.
As 2023 comes to a close, agents and owners around the country are watching the property market like hawks.
Will supply ease up? Will property prices go down? Will rental growth waver? According to Domain, Australians can expect a mixed bag of market change with various push-pull factors shaping next year’s property forecast.
“By the end of 2024, combined capital house and unit prices are forecast to be at a record high,” Domain reported.
The group cited supply shortfall, robust population growth and high interest rates as some of the factors that will influence this upward price trend.
But when it comes to the fine print of market growth, there are five cultural factors that Domain believes will fundamentally transform the property market in 2024.
From public attitudes to demographic trends, here are five trends that Domain prophesies will sweep the nation next year.
1. Interest rate relief
For the past 18 months, Australian home owners have faced unprecedented levels of mortgage stress. Thirteen rate hikes from the Reserve Bank of Australia have brought the interest rate to a 12-year high of 4.35 per cent, as the country scrambled to curb inflation.
Going into next year, Domain predicts that “stretched affordability and lower borrowing power will continue to place a ceiling on buyers’ capacity to pay for a home” in the early months of 2024.
But by the latter months of next year, the company prophesies that a cut in interest rates – or, alternatively, an easing of the mortgage serviceability buffer – is “likely to come into fruition”, raising Australians’ borrowing capacity and increasing demand.
If this spike in demand comes to pass, Domain predicts the emergence of “another price upswing” across the country’s housing markets.
2. The flight to affordability
Affordability is more important than ever to Australian house hunters, and Domain believes this trend will only continue to gather momentum in the upcoming year.
A number of changes are expected to arise to quench this hunger for affordable homes. Prospective buyers “will explore bridesmaid suburbs and areas they initially overlooked”, causing urban spread and gentrification to accelerate as Aussies look further afield.
First home buyers will benefit from the federal government’s Help to Buy scheme set commence in 2024, likely leading to a surge in affordable units in capital cities.
Meanwhile, Domain also predicts a rise in generational inheritance as Baby Boomers dig into their pockets to help their children and grandchildren purchase property.
“Policies aimed at making the home ownership dream a reality will exacerbate the stress on housing supply as more buyers compete for the same number of properties,” predicted Domain.
3. YIMBYs will replace NIMBYs
Domain predicts that 2024 “will be the year of progressive housing and planning reforms, with the not-in-my-backyard folk swinging to yes-in-my-backyard”.
The firm expects to see a “visionary attitude” towards infill development as Australian city dwellers grow more accepting of radical approaches to fast-track densification in high-demand urban areas.
If this cultural shift takes effect, Domain forecasts that it could place the country “on a path that shapes our cities for the future and our changing demographics rather than planning for the Australia of yesterday and today”.
4. Population growth
Strong population growth, fuelled predominantly by overseas migration, will continue to shape house prices – but Domain predicts that net international migration has already reached its peak.
It is the long-term, cumulative effects of population growth that Domain expects to see shaping the housing market in 2024 and beyond, even if migration returns to “normal” patterns by 2025, as forecasts predict.
“Together with a perilous rental market, it makes purchasing more attractive and may shift some to buy, given the current challenges of securing a lease,” Domain revealed.
5. Rental growth will reach a tipping point
“Australia’s rental market is playing a much larger role in our housing market than we have been used to,” reported Domain.
The trend of more Australians renting for longer is set to continue into 2024, but Domain noted that “a tipping point will be reached at some stage”, causing rental growth to slow and some submarkets begin to rebalance.
Stretched affordability will be the key driver behind this normalisation of the rental market, according to Domain.
The firm also predicted that increased uptake of house shares and the expansion of first home buyer incentives will transition some renters into buyers.
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