Combined capital city house and unit prices are tipped to reach a record high in 2024, after price expectations defied forecast declines in 2023.
According to Domain’s 2023 End-of-year wrap and 2024 outlook house prices nationally are forecast to rise between 5 and 7 per cent next year, while units are tipped to rise between 2 and 4 per cent.
Domain Chief of Research and Economics Dr Nicola Powell said prices in the combined capital cities are expected to rise further – between 6 and 8 per cent for houses and 2 to 3 per cent for units.
“When you look at the different capital cities, we are anticipating that Sydney is still going to lead, with forecast price gains between 7 and 9 per cent for houses,” Dr Powell said.
“Other cities like Brisbane and Adelaide, they’re second in the ranks in terms of price growth, between 7 and 8 per cent is what we’re predicting (for houses).
“I think what it really showcases though 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.”
The year that surprised everyone
Dr Powell said that was exactly what had happened in 2023, with the combined capital median house price rising to a new peak of $1.084 million, while the combined capital city median price for units is just 0.5 per cent from a record high at $624,290.
“We are looking back on 2023, and it really has been the year that price growth defied high interest rates,” she said.
“We did see a new property cycle begin, because we saw house prices bottom out at the end of 2022.
“So it was almost like a clean slate at the beginning of 2023 and we saw prices rise.”
Dr Powell said we had a shortfall of housing supply in 2023 and this combined with rapid population growth to keep property prices on the increase.
“We also had a strained construction sector and, of course, the tightest rental market on record,” she said.
“We saw it being led by Sydney but the other capitals have followed.”
The report showed Sydney’s median house price, at $1.58 million, is just 0.4 per cent away from a new peak, while Brisbane ($865,072), Adelaide ($862,078) and Perth ($724,033) are at their highest on record.
Brisbane’s median unit price of $511,476 is also at peak.
“Sydney is very, very close to reaching a new record highs, it’s just 0.4 per cent away, and that in dollar terms is $7000,” Dr Powell said.
“It just showcases how rapidly we’ve seen the recovery unravel, particularly in a market like Sydney, and particularly in a city where you’ve got the median house price at $1.58 million, which is a very expensive market.”
A tale of two halves
Dr Powell said this year’s property market was a year of two halves, with the first portion of the year market by a scarcity of new listings.
But in the second half of 2023, dynamics shifted as sellers regained market confidence, bringing pent-up supply onto the market.
“It was almost that winter became the new spring because we saw sellers regain confidence,” Dr Powell said.
“They came to market earlier, in that latter part of winter, and we’ve seen a strong flow of new listings and that’s helped to ease competition between buyers, but it’s also eased the pace of price growth.”
The report also showed 312,893 houses were sold this year, while 115,893 units changed hands.
The highest sale of the year was 24 Victoria Rd, Bellevue Hill, which sold for $70 million.
Nationally, four-bedroom houses were the most highly sought type of property, with the suburb of Leda, in Perth, recording the quickest sale time of just 8 days.
Across Australia, the top keyword searches on Domain show what agents need to put in their listing descriptions, with the word pool remaining at the top of the list.
But it seems a study has become a more popular home feature, replacing the keyword ‘view’ as the second most searched feature.
“I think when you’re thinking about the words to put in a listing, it is very crucial to have the right ones,” Dr Powell said.
“Some of the changes that I think have been interesting is ‘study’ is certainly up there.
“It went from fifth in 2020 to sitting at second, so a study has become a crucial element of a home.”
Dr Powell said another “mover and shaker” when it came to key words was ‘granny flat’, which now ranks 9th nationally, while ‘granny’ came in 10th.
“Ido think that 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.”
The report also showed the most viewed property on Domain was Kyle and Leslie’s home from The Block, at 14 Charming St, Hampton East.
Five trends for 2024
Dr Powell said there were five trends she predicted would shape the property market in 2024, kicking off with an interest rate cut, which would spark demand.
“Stretched affordability and lower borrowing power will continue to place a ceiling on buyers’ capacity to pay for a home. We could see measures that improve this outlook for buyers in 2024,” she said.
“A cut in interest rates or other stimulus measures will spark demand and create another price upswing – a prospect likely to come to fruition in the latter part of 2024.”
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.”
Dr Powell has also tipped 2024 to be a year when progressive housing and planning reforms will increase with ‘not-in-my-backyard’ proponents switching to ‘yes-in-my-backyard’.
“We will see a visionary attitude towards housing development and affordability that takes a radical approach to enable urban densification in areas where people want to live,” she said.
“This could involve tweaking planning powers away from local governments to avoid decision-making sway from NIMBYism, placing us on a path that shapes our cities for the future and our changing demographics rather than planning for the Australia of yesterday and today.
“The federal government’s effort to address housing affordability and facilitate greater entry for first-home buyers into the property market is expected to generate substantial activity.”
Population-driven housing demand will also continue, but Dr Powell said overseas migration has peaked, which was also a good thing for the rental market.
She said Australia’s rental market was playing a much larger role in the wider housing market that we have typically been used to, with more people renting and for longer.
“This will continue to play out in 2024,” she said.
“However, a tipping point will be reached at some stage, rent growth will slow, and some sub-markets will operate with a more balanced rental market.
“This will be driven by stretched affordability.
“More renters opting for house shares and first-home buyer incentives will help transition some to being owners or fast-track others to a more affordable purchase.
“As mortgage stress weighs in, cashed-up buyers will benefit from landlords divesting early in 2024.”