20th December 2023 / Sarah Lowry: 2023 Market Wrap & Looking Ahead to 2024

As another year draws to a close, it is interesting to look back and reflect on what happened in the property market over the last twelve months and look ahead and consider what 2024 may have in store.

The strength and pace of Australia's market rebound was a surprise to many in 2023, particularly given the consistent interest rate rises throughout the year. Cameron Kusher, Director of Economic Research at PropTrack, notes that at the end of 2022, sales volumes were sitting at similar levels to those in late 2019, having persistently declined as official interest rates were lifted every month from May 2022 onwards. In early 2023, there was a strong rebound in sales volumes that continued throughout the year.

Along with sales volumes, buyer activity increased significantly this year, however the total number of properties available for sale remained at persistently low levels in 2023. Buyers had little choice, which created significant competition. Whilst new listing volumes did increase from the middle of the year, particularly in Melbourne and Sydney, this lift in supply did little to moderate price growth, other than to slow its pace.

Across Australia, four-bedroom houses were the most highly sought type of property, with the top keyword search term on Domain was "pool". A study has become a more popular home feature, replacing the keyword "view" as the second most search feature. Dr Powell said another "mover and shaker" when it came to key words was "granny flat", which now ranks ninth nationally and "showcases not only our tight rental market, but perhaps people are wanting the ability to have a separate space to actually work from home…it could indicate a rise in intergenerational living also."

Looking ahead to 2024, the Domain Group forecasts that national house prices will rise between 5 and 7 per cent, while units are tipped to rise between 2 and 4 per cent. Domain Chief of Research and Economics, Dr Nicola Powell, explains: "I think what it really showcases is we are expecting interest rates to remain higher for longer and what we're really predicting here is the under supply of housing is really going to trump high interest rates."

Dr Powell said we had a shortfall of housing supply in 2023 and this, combined with rapid population growth, kept property prices on the increase. "We also had a strained construction sector and, of course, the tightest rental market on record," she said.

The Reserve Bank of Australia (RBA) handed Aussies an early Christmas present this month, leaving interest rates on hold at its final meeting of the year. A cut in interest rates or other stimulus measures in 2024 will spark demand and create another price upswing – a prospect Dr Powell considers likely to come into fruition in the latter part of next year.

Dr Powell said urban spread and gentrification would also rise, as more people chased affordability. "Buyers will explore bridesmaid suburbs and areas they initially overlooked," she said. "The flight to affordability for first-home buyers will be ignited by the federal government's 'Help to Buy' – a shared equity scheme of up to 40 per cent of a home."

From the middle of 2024, we'll also see the commencement of stage three tax cuts, which are most beneficial for higher income earners. In turn, this could lead to increased demand for higher priced housing.

PropTrack's economic team expects that price growth will be slower in 2024 than in 2023. However, they anticipate persistent strong demand for housing, limited new housing construction, and an expectation that total listing volumes will remain low with uncertainty around whether new listing volumes will be as strong as they have been over the second half of 2023. These factors will likely lead to further price gains.

If we can assist you with your property plans for the new year, please reach out. In the meantime, have a happy and safe festive season – on behalf of the team at Fletchers, we wish you all the best for the new year ahead.