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13 December, 2023 / Category: Blog
For our final market insight article of 2023, we sat down with Infolio’s Managing Director, Lauren Staley and Infolio’s Head of Strategic Growth, Nicole Hiddlestone, to talk about their predictions for the property market in 2024. We deep dive into some hot topics influencing buyers, vendors, investors and renters, covering issues like interest rates, property prices, rental availability and government policies.
Q: When will there be more family homes available on the market?
[Lauren] This year’s spring selling season saw an increase in new listings by 30.8% in Melbourne. This certainly added to the consumer sentiment. However, it is essential to note that we were coming off a low base, and most of the stock hitting the market was ex-investor rather than family homes.
Vendor’s confidence to sell has grown because they feel like we are at the top of the rate cycle, coupled with some sellers just being tired of waiting and or needing to sell, particularly in regional Victoria, so we expect this to lead to some more family homes coming to market in early 2024. However, we expect family homes in blue-chip suburbs to remain tightly held, with turnkey properties in particular to remain hotly contested in 2024.
The substantial increase in public sector infrastructure spending will continue to make it difficult and expensive for the private sector to find materials and labour. This will likely limit the potential for new housing supply through 2024 and increase the competition for turnkey properties.
Q: Will interest rates go down in 2024?
[Lauren] Of the big four banks, only NAB thinks we have yet to hit the peak interest rate of the big four banks. The others expect rates to plateau for most of 2024, with some predicting we will see a modest decrease towards the end of the year.
However, only time will tell if borrowers will see some relief to their mortgage repayments next year.
Q: Will house prices come down?
[Lauren] Following modest growth in 2023 (Melbourne is up approximately 4.7%), we expect house prices will continue to increase in 2024 by about 3-4% in Melbourne (that’s a $90,000 to $120,000 increase on a $3 million property). With increasing migration and a lack of available family homes ready to move in, there will continue to be a supply and demand imbalance. Turnkey homes in blue-chip areas are expected to perform the best.
Melbourne will likely see a slight dip during January before growing again as we enter the autumn market.
Q: Will we see more ‘distressed’ selling in 2024 due to high-interest rates and higher unemployment?
[Lauren] Distressed selling is when a vendor can no longer afford to hold their property for various reasons (i.e., employment, changing family circumstances, or rising interest rates). We tend to see this more often in investment properties and holiday houses rather than family homes, as vendors usually try to hold their primary place of residence for as long as possible.
With unemployment predicted to rise from 3.6% (current) to approximately 4.25% in 2024, we expect a slight increase in distressed selling. This is already starting to happen in Sydney’s outer ring. However, the mass distressed selling predicted by some media outlets earlier this year, which was meant to happen due to the mortgage cliff, is not anticipated.
According to the RBA, around 94% of owner-occupier borrowers can still pay their mortgages and essentials without dipping into savings. And for the small group of households whose essential expenses exceed their income, about 70% have enough savings to fund their expenses for at least six months.
Q: Will investors come back into the market in 2024?
[Lauren] Government policy is currently stacked against investors, with rising taxes and limited incentives to own investment properties. While we are seeing a small number of investors return to the market, we don’t expect a mass return of investors in the short term. Most investors are unlikely to return to the market until interest rates and rental returns stabilise and show value again, which we don’t anticipate until 2025.
Q: Will it be easier to find a rental property in 2024
[Nicole] We have hit record migration numbers of approximately 600,000 nationally this year. This is expected to drop to 460,000 in 2024, providing some reprieve from the growing demand for rental properties. However, the rental crisis will not likely ease until at least 2025, when some supply is expected to hit the market.
Home completions in 2024 are forecasted to drop to 153,000 homes, meaning we are still in a significant deficit compared to population growth. According to the ABS, 2024 building completion rates are expected to be the lowest since 2012. This ongoing imbalance between demand and supply will continue to put upward pressure on rents throughout 2024.
Q: Will build-to-rent continue to grow in 2024?
[Nicole] There is demand for 15,000 and 18,000 new apartments to be delivered annually in Melbourne. There is a significant supply deficit, with Melbourne only delivering approximately 10,000 new apartments in 2024.
This deficit in supply will lead to upward pressure on rents in the short and medium term. While build-to-rent developments should help gradually add to the rental supply, we aren’t likely to see a material increase until at least 2025.
In the long term, in Melbourne, there are currently 5,500 build-to-rent apartments under construction and another 17,500 in longer-term planning*.
Q: Will rents continue to rise?
[Nicole] A rental market is in equilibrium when the vacancy rate is around 3%. It is currently below 1%. The news for renters in 2024 is expected to remain grim, with SQM forecasting rents to rise an average of 7-10 per cent again next year.
Given the current supply-demand imbalance, it is reasonable to expect elevated continued growth in the rental market over the next three to four years unless significant government intervention changes the outlook.
Q: How might changes in government policies impact the Victorian rental market in 2024?
[Nicole] There are two government policies that we will be watching closely in 2024 that might influence the rental market.
The first is housing affordability initiatives. Any policies aimed at improving housing affordability, such as tax incentives, subsidies or grants for developers for affordable housing, may encourage the construction of more rental properties with a lower than comparable rental market price point, positively impacting renters seeking more affordable rental housing.
The second is regulations on short-term rentals. If the government introduced stricter rules on short-term rentals, it might encourage property owners to shift towards traditional, long-term rentals and increase the supply of long-term rental properties.
Sources: Charter Keck Cramer – State of the Market, October 2023 | SQM – November 2023 property market update.
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