Property price growth rates are set to slow down over the remainder of 2024, according to the latest Herron Todd White (HTW) Month in Review.
In the February report, HTW Head of Group Risk and Compliance, Kevin Brogan, said multiple drivers would influence sale volumes and price direction, but the fundamentals of supply and demand would again be the ultimate arbiters of performance in 2024.
“Firstly, escalating construction costs will continue to be an issue,” Mr Brogan said.
“Although there has been an easing in the price of some materials, demand for trades remains high.
“Not only is labour more expensive, but securing trades within a reasonable timeframe remains a challenge.”
He said for this reason, new supply would be limited, and those homes that are new, or deemed ‘near new’, would garner plenty of buyer interest.
Mr Brogan said there continued to be concern about building company risk going forward this year.
“Firms kept closing last year as tightening margins took their toll,” he said.
“We’ll need to see this run of business shutdowns slow, to help address the current state of undersupply.”
He said that while listings are on the rise, the huge surge in overseas migration would continue to put supply levels under pressure.
“Overseas migration will again fuel demand for housing in an already tight rental market,” he said.
“The ingress of arrivals is likely to slow this year as compared to 2023, but there will still be plenty of demand for shelter.”
According to Mr Brogan, one area worth watching when it comes to supply, is the repurposing of some commercial buildings in major centres.
“Underutilised office space could find a new lease of life as part of a residential redevelopment,” he said.
“Another supply boost may come from advanced construction techniques such as prefabrication of building components or homes manufactured offsite and then shipped to an allotment.”
Mr Brogan said, 2024 would be an important year in Australian housing where clever solutions were required to address the already stretched markets.
“Of course, those who already hold property look set to enjoy the benefits of the supply/demand imbalance for a while yet,” he said.
Sydney
HTW Associate Director, Matt Greenland, said that despite Sydney property prices rebounding strongly in 2023, with increasing stock levels in Spring and with a final interest rate rise at the start of November, the rate of growth had slowed to just 0.2 per cent in the month of December for houses, with no increase for units.
“The potential is that this increased supply may to lead to steady or even slightly declining prices in the first half of the year,” Mr Greenland said.
“Any further interest rate rise, which appears unlikely but is still a possibility, would almost certainly see prices start to decline in many sub markets.
“Countering this is continued strong immigration levels and a shortfall in the required construction of new dwellings.”
He said one theme that would continue from 2023 is that fully renovated houses or high quality dwellings that are near new would still attract more interest than “fixer uppers”.
“Our prediction is the post-Christmas hangover and the outlook of another year of interest rate stress is going to see the broader market soften with agents expecting an increased number of listings hitting the market towards the end of January, coupled with buyers being more cautious,” he said.
Melbourne
HTW Director, Perron King, said the Victorian property market was likely to stabilise and had the potential to grow over the next 12 months.
“There are multiple factors that are likely to impact, including the continued growth in immigration to Australia, interest rates forecast to stabilise and potentially decrease, and incentives being offered by state and federal governments,” he said.
“Whilst there has been a decline in land being sold for new developments, there is some expectation that this will improve in 2024.
“This is expected to occur predominantly in Melbourne’s outer growth suburbs with higher demand for low to middle tier housing.”
Brisbane
HTW Director, David Notley, said he the market momentum that established itself during the final months of 2023 would continue this year.
“That is, of course, a good thing if you already hold property,” Mr Notley said.
“A quick look at CoreLogic’s statistics show Brisbane saw some convincing value gains last year, and we venture most of that uptick came in the last half of the year.
“This trend of demand outstripping supply is well established, and it’s not going away anytime soon.”
He said the reasons for this included high levels of population growth and the fact that Brisbane allows a buyer to acquire a good-sized home on a reasonable size allotment within 10 minutes drive of the CBD.
Adelaide
HTW Valuer, Nick Smerdon, said prices continued to increase, despite higher interest rates and a slowdown in sales activity.
“The Spring selling period did see an increase in the volume of listings however total listings continue to remain at historical lows,” Mr Smerdon said.
“Areas of the market to watch in 2024 will be the outer ring, inner metropolitan affordability and lifestyle properties.”
Perth
HTW Director, Chris Hinchliffe, said the affordability of the Perth market remained a notable feature in the current real estate landscape, despite some economic uncertainties, such as those currently affecting lithium and nickel operations.
“However, the depth of current demand is considered to outweigh this uncertainty, and we consider that there remains an optimistic anticipation for a robust market performance throughout 2024,” Mr Hinchliffe said.
“For investors, the Perth market will continue to offer opportunities for investments.
“Perth has demonstrated some of the strongest capital city yields in Australia, reaching up to 4.6 per cent in November 2023, although our valuers are seeing far higher rates than this in many suburbs.”
Darwin
HTW Valuer, Jeremy Callan, said coming off a fairly subdued 2023 market across Darwin, 2024 could dish up much the same if the current drivers continued.
“Looking forward, renovated homes will remain popular as lingering high construction costs continue to wreak havoc on the building industry,” Mr Callan said.
“2023 saw the emergence of a two-tier market with renovated homes remaining popular despite interest rate rises and 2024 will be no different as home buyers see the value in turnkey properties.
“Established areas in Darwin’s northern suburbs continue to provide good value in the current economic climate.
“Block sizes of 800 square metres and above, most offering three-bedrooms and above with homes under $600,000, will continue to deliver value to potential buyers, far below the median prices of other capital cities.”
Canberra
HTW Assistant Valuer, Michael Qu, said Canberra was one of the few cities recording accelerated housing supply, mainly across units and townhouses.
He said three areas worth watching include Weston, Wanniassa and Phillip.
Hobart
HTW Valuer, Mark Davies, said the Hobart investment market might be in from a stronger year in 2024.
“Areas to watch are those on the outskirts of Hobart. Look around Glenorchy, Claremont, and West Moonah,” Mr Davies said.
“These areas are positioned within 20 minutes of the CBD by car, and all offer good public transport (bus) throughout the day.
“All essential services are with reach of these suburbs including shopping centres and good schooling facilities.
“Conversations with local leading real estate agent indicates that sentiment is positive with a potential upswing in the market throughout 2024 due to the decreasing inflation rates and potential lower borrowing costs later in the year.”
