After a mixed few years for Australian property, experts are starting to look at a number of issues that will potentially play out in 2024.
Domain’s Chief of Research and Economics, Dr Nicola Powell, said there are six things that might happen in the next 12 months, including interest rates falling, buyers looking for affordability and surging population numbers boosting demand.
In a surprising move, the Reserve Bank of Australia raised interest rates on Melbourne Cup Day, pushing the cash rate target to 4.35%. Dr Powell said that a potential interest rate cut could inject momentum into the market by boosting affordability and buyer confidence.
Affordability issues and lower borrowing power have constrained many aspiring homeowners. Dr Powell said that an easing of the mortgage serviceability buffer, possibly from 3 percentage points to 2.5, could boost borrowing capacity. This small change could help those struggling to enter the property market and also lift consumer sentiment.
With affordability challenges in major cities, buyers may explore “bridesmaid suburbs” – second-choice areas that offer more reasonable property prices. Dr Powell said a trend of people looking further afield or opting for units over houses has been growing.
Dr Powell also predicts a shift in housing attitudes, from the classic “not in my backyard” (NIMBY) outlook to a “yes in my backyard” (YIMBY) one. Progressive housing and national planning reforms are expected, encouraging urban densification. She said there is a need for both urban sprawl and densification, challenging the prevailing resistance to development often seen at the local government level.
While net overseas migration may have peaked, Dr Powell said strong population growth is likely to continue over the next 12 months, putting the rental market under extreme pressure. This growth, fuelled by overseas students and a demand for rentals, will strain property values and the availability of rental units.
Australia has witnessed a trend of prolonged rental growth, but Dr Powell said this might be coming to an end. Rental price growth, which has been in the double digits, is expected to slow particularly in the latter half of the year. Dr Powell said that policies favouring first-home buyers could be a catalyst, alleviating rental demand as tenants transition to homeownership.
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