Key developments of property market dynamics in 2024
The national property market continued its growth momentum in February 2024, with all capital cities, except Hobart, experiencing positive increases in prices: Sydney (0.5%), Melbourne (0.2%), Brisbane (0.5%), Adelaide (0.8%), Perth (0.5%), ACT (0.5%), Darwin (0.1%), and Hobart (-0.2%). Notably, over the past 12 months, the top-performing cities were Perth (16.32%), Adelaide (12.76%), and Brisbane (12.76%).
The dynamics of the property market will be determined by key factors as follows:
- Potential cash rate cuts
The rapid surge in the cash rate since May 2022 has contributed to the consistent decline of inflation, from 7.8% in December 2022 to 4.1% in December 2023 and 3.4% in January 2024. Our modeling and trend analysis predict inflation will fall below 3% by June 2024 and could risk dropping below 2% by December 2024 if the cash rate remains steady.
Although there are many unknown domestic and global factors, the RBA will most likely initiate the first rate cut as early as June 2024 to prevent the inflation rate from dropping too low. Once the cuts begin, they could occur in a series to really influence the market’s sentiment.
A lower rate means higher borrowing capacity for property investors and home buyers, ultimately boosting property prices to new heights amid supply constraints and expected population increases.
- Foreign buyer interests on the rise
Foreign buyers play an important role in the demand for Australian real estate. According to the Foreign Investment Review Board (FIRB), foreign buyers spent $7.6 billion in 2021-22, compared to $5.7 billion the previous year. Notably, more than 44% of this money came from mainland China and Hong Kong.
Additionally, the FIRB’s report on foreign investment showed a remarkable amount of funds, ranging between $70 billion and $80 billion, channeled into foreign commercial real estate investment in Australia per year over the last few years. The largest investors were from the United States, Canada, Singapore, and China.
These trends highlight the attractiveness of Australia as a stable and lucrative investment destination for foreign buyers. Since the opening of the border, the search volume from overseas property seekers, mainly from China, the U.K., the U.S., and New Zealand, is on an upward trajectory, making Australia an increasingly preferred investment destination in the world.
- A surge of demand amid constraints in supply will further boost property prices
The price trend is influenced by both demand and supply sides. On the demand side, population growth remains high, with the government projecting an increase of approximately 1 million migrants over the next three years. Most of this population growth is expected in major cities, further intensifying housing demand in an already tight market. On the supply side, new housing construction activity continues to lag behind long-term trends. In recent months, the number of new dwelling completions has decreased to just over 40,000 per quarter, down from around 50,000 per quarter before the pandemic, which further intensifies the unmet housing demand. Additionally, new dwelling approvals have consistently trended downward, dropping from 20,600 in March 2021 to 14,100 in November 2024.