Is 2024 the Right Time to Buy a House in Australia?

Despite economic difficulties, the Australian real estate sector surprised everyone in 2023 with its surprising durability and growth. Traditional thinking was that the market would cool as interest rates rose; yet, house prices continued to rise due to high demand and little supply. Motivated by a concoction of factors including a tight rental market, limited construction capacity, and growing immigration, this phenomenon created the illusion of a sector that was bucking the trend.

Forecasts for ongoing, although moderate, increases in property values add more mystery as we turn to 2024. The continued rise of the population, along with the restricted supply of homes, lend credence to this prognosis and point to a continuing optimistic narrative for the real estate market. Rising living costs and the possibility of more interest rate adjustments cast doubt on the market’s long-term viability, casting a pall of economic uncertainty over this optimism.

In light of this complicated background, one must ask: Is it wise to invest in Australian real estate at the moment?

The State of the Australian Property Market in 2023

The 2023 Australian property market showed tenacity and strength despite rising interest rates and a house supply deficit. Many expected this time to calm off after vigorous monetary tightening, yet it was buoyant.

Impact of Interest Rates

It was expected that home demand would be considerably reduced when the Australian Reserve Bank decided to boost interest rates many times, with the official cash rate reaching 4.35% by the end of 2023. According to conventional thinking, the market would cool down as a result of increasing borrowing rates since they would discourage potential purchasers. Nevertheless, the result did not match predictions. A seemingly paradoxical upturn occurred in the real estate market notwithstanding these thirteen rate rises. This outlier may be explained by a combination of factors, including a lack of available homes due to fast population expansion, building sector limitations, and the most competitive rental market in history. Amidst rising borrowing rates, these forces came together to maintain and even raise house values.

Housing Supply Shortage

Because of the severe lack of available homes, the market has been able to withstand the storm. Construction delays and reduced capacity in the face of increasing material costs and labour difficulties have contributed to this scarcity. On the other hand, the demand for homes in Australia was boosted by the influx of newcomers after COVID-19. In 2023, prices rose steadily due to the supply-demand imbalance, with yearly growth rates of 5.42% nationally and 6.54% in major cities.

Surprising Resilience of Property Prices

The persistent demand for existing homes, in conjunction with the persistent supply limits, has kept prices from falling. Despite wider economic worries, such as inflation and worldwide market instability, real estate continues to be a popular investment choice, lending credence to this scenario.
Tax Deductions on Investment Property

Forecasted Property Price Growth in 2024

House and unit prices are projected to continue rising in the real estate market in 2024, with estimates ranging from 5% to 7%. Unexpectedly, the market’s momentum has persisted through all thirteen interest rate rises scheduled for 2022–2023, suggesting strong demand driving prices upward.

Australia Dwelling Prices
Source: CoreLogic Australia, PinPoint Macro Analytics

Economic Forces at Play

Several economic forces are shaping the property market outlook for 2024. Notably:

  • Interest Rates: A major contributor to the skyrocketing cost of borrowing is the accumulation of steep interest rate rises, which will reach 4.35% by the year’s end. If the expected rate decreases come to fruition in late 2024, which might boost buyer demand and stimulate market activity, the market’s reaction to these changes will be critical.
  • Population Growth and Supply Shortages: Supply is constrained due to factors such as the building industry’s pressure and the ongoing flood of immigrants after COVID-19. One of the main causes of price rises is this mismatch between supply and demand.
  • Economic Growth and Inflation: We anticipate a reduction in inflation and a modest rise in GDP. There is a jumble of factors at play here, including a tight labour market. While they do help keep prices stable for the time being, they also reveal hidden forces that may change market dynamics.

Demand, Supply, and External Conditions

The interplay between demand and supply remains the linchpin of the property market’s performance. High demand amidst a supply shortage has historically favoured price growth, a trend that is likely to continue into 2024. However, the broader economic context—encompassing factors like the cost of living, wage growth, and global economic conditions—will also play a significant role. Financial stressors on buyers, for instance, could dampen demand to some extent, moderating price growth.

Moreover, regional disparities in market performance are expected, with some areas possibly outperforming others based on local demand-supply dynamics and economic conditions. For example, cities like Sydney, Brisbane, and Perth are forecasted to experience higher growth rates, reflecting a combination of favourable demand conditions and relative supply shortages.

Cities with Promising Growth Prospects

  • Sydney: Sydney is forecasted to see strong increases in house prices, with predictions of growth ranging from 7% to 9%. This optimism is likely fueled by its status as a major economic and population centre, attracting both domestic and international migrants.
  • Brisbane and Adelaide: Both cities are expected to experience significant growth, with house price increases forecasted at 7% to 8%. These regions have been beneficiaries of internal migration trends, with individuals and families seeking more affordable living conditions compared to Sydney and Melbourne. Their growing appeal is reflected in the robust demand for housing, driving up prices.
  • Perth: The market dynamics in Perth indicate it as one of the “easy picks for out-performance in 2024,” with advertised stock levels significantly lower than the historic five-year average and sales volumes higher. This scarcity in supply, coupled with sustained demand, positions Perth for notable growth.

Areas Experiencing Slowdowns

  • Sydney and Melbourne: While Sydney shows signs of strong growth in house prices, both it and Melbourne are witnessing a cooling in certain segments, particularly in the higher-end market. Melbourne, in particular, saw home values slightly decrease by -0.1% in November 2023, indicating a potential softening in the market. These cities have faced challenges, including affordability issues and the impact of stricter lending standards.
  • Capital Cities’ Mixed Performance: Across some capital cities, growth is already showing signs of slowing, with evidence of weakening home values and an increase in supply coming to market. This indicates a shift towards more balanced conditions after the heated market activity experienced in previous years.

Analysis and Implications

The significance of local variables in influencing changes in property prices is shown by the geographical variances within Australia’s real estate market. Sydney, Brisbane, Adelaide, and Perth are just a few examples of cities that are poised for significant expansion. These cities showcase the power of demand-supply mismatches, economic possibilities, and lifestyle features that draw citizens.

On the flip side, the downturn in some areas of Melbourne and Sydney is a result of competitive pricing, affordability issues, and maybe the accumulation of steep price hikes in prior years. There are advantages and disadvantages to investing and buying a property based on these geographical distinctions. Investing in locations with promising development prospects may pay off, but avoiding downturns requires careful analysis of regions exhibiting indications of cooling.

Buyer Demographics and Behavior

First Home Buyers (FHBs)

The landscape for first home buyers (FHBs) has been challenging, with their market participation notably fluctuating. A decline was observed with FHBs entering the market at a near eight-year low of 30.3% for new housing purchases. This downturn is attributed to the increasing barriers to entry, including high property prices, rising interest rates, and the significant time required to save for a deposit, which has surged to an average of 9.7 years. Despite these hurdles, there’s a nuanced silver lining; softer market conditions expected at the start of the year may provide a window of opportunity for wealthier FHBs, suggesting a slight shift in the demographic towards those with more substantial financial backing.

Domestic Investors

Domestic investors have shown a growing interest in the property market, with their market share increasing to 16.5%. This rise indicates a strong belief in the long-term value of Australian real estate, despite the recent tightening of credit conditions and the higher cost of borrowing. Investors are likely drawn by the potential for capital growth and rental yields, particularly in regions where demand remains robust and supply constraints persist.

Foreign Investment

Foreign investment in Australian real estate has also seen an uptick, especially in new housing markets, where it rose for the fourth consecutive quarter to 10.1%. New South Wales and Victoria have been particularly attractive to foreign buyers, suggesting a global recognition of the intrinsic value and potential returns from the Australian property market.

Changing Demographics and Buyer Behavior

The changing demographics, notably with a shift towards wealthier first-home buyers and increased foreign and domestic investor activity, are reshaping the Australian property market. These shifts are affecting market dynamics in several ways:

  • Price Sensitivity and Affordability: As FHBs face affordability challenges, there’s a growing focus on the peripheries of major cities and regional areas where prices are more accessible.
  • Market Segmentation: Increased investor activity, both domestic and foreign, is leading to market segmentation, with certain areas and property types (e.g., new developments, and apartments) becoming investor hotspots.
  • Supply and Demand Pressures: The interaction between demand from various buyer groups and the constrained supply, especially of new housing, is exacerbating price pressures in some regions, while potentially leading to oversupply in others if developments are not aligned with actual occupancy needs.

Government Initiatives - Help to Buy Program

The ‘Help to Buy’ programme is one of the most important government initiatives that will affect the Australian real estate market. A maximum equity contribution of 40% for newly constructed homes and 30% for previously owned properties is available through this programme to help qualified buyers. Buyers who would not be able to afford the market otherwise would benefit from this assistance. Because more people from more backgrounds will be able to buy a home under this programme, demand is likely to rise, which might lead to higher housing prices in some areas.


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Economic Conditions Affecting the Property Market

Inflation and Interest Rates

The broader economic conditions, particularly inflation and interest rates, are crucial determinants of the property market’s health. The period covered by the report saw a series of interest rate hikes, aimed at controlling inflation, which has increased the cost of borrowing. Such economic manoeuvres have a dual impact: on one hand, they can cool overheated markets by making mortgages more expensive, thus reducing demand; on the other hand, they can strain potential buyers’ affordability, particularly first-home buyers, thereby impacting the lower-end of the market.

Anticipated movements in inflation and interest rates are closely watched by market participants. Moderate inflation is generally a sign of a healthy economy, but when coupled with high-interest rates, it can dampen market activity. We expect that interest rates might begin to stabilize, and possibly decrease, towards the late parts of 2024. Such a shift could potentially reinvigorate buyer interest and stimulate market activity, given that the cost of borrowing would decrease.

Economic Growth

Economic growth projections also play a vital role in shaping the property market. Modest GDP growth is expected, which could support a steady property market. However, economic growth must be balanced with other factors like wage growth and employment rates to sustainably support buyer demand.

As government initiatives aim to boost affordability and encourage market participation, the broader economic environment will dictate the overall market sentiment. For instance, if inflation is controlled without drastically increasing interest rates, it could lead to a more robust property market. Conversely, if economic conditions tighten, the market could experience reduced activity, especially among first-time buyers and those at the lower end of the income spectrum.

Comparative Analysis

The optimistic and pessimistic viewpoints provide a comprehensive picture of the Australian property market’s potential trajectory. The optimism is largely based on solid fundamentals like supply constraints and demographic trends that support demand. However, the pessimistic views remind stakeholders of the inherent uncertainties and risks, particularly those associated with economic factors beyond the real estate market’s control.

Key Takeaways for Stakeholders

  • Investors and homebuyers should remain cautious, balancing the potential for growth with the understanding of underlying risks. The market’s resilience, despite challenges, suggests that well-informed and strategic decisions can yield positive outcomes.
  • Diversification and research are essential. Potential buyers should consider diversifying their investment portfolios and conducting thorough research into specific regions and property types that align with their long-term goals and risk tolerance.
  • Stay informed on economic and policy developments, as these can significantly impact market conditions and investment viability. Staying abreast of changes can help in adjusting strategies promptly to mitigate risks or capitalize on emerging opportunities.

Critical Factors for Potential Buyers to Evaluate

Market Dynamics and Regional Variations

  • Understand Local Market Trends: Recognize that the Australian property market is not monolithic; regional variations are significant. Researching local trends, such as price movements, supply constraints, and demand drivers, is crucial.
  • Assess Supply and Demand Dynamics: Evaluate the balance between supply and demand in your target area. Areas with limited supply but growing demand may offer better prospects for value appreciation.

Economic and Financial Considerations

  • Interest Rates and Borrowing Costs: Stay informed about current interest rates and monetary policy trends, as these will directly impact mortgage affordability and your long-term financial commitment.
  • Inflation and Economic Outlook: Consider the broader economic indicators, including inflation rates and GDP growth forecasts. A stable or growing economy can support property value growth, while high inflation without wage growth can erode real purchasing power.

Government Policies

  • First Home Buyer Incentives: If you’re a first-time buyer, investigate government programs like the ‘Help to Buy’ scheme that may offer financial assistance or incentives.
  • Tax Implications and Changes: Be aware of any tax considerations, including potential changes to property investment taxes or incentives that could affect your investment.

Advice on Timing, Market Research, and Financial Planning

Timing the Market

While timing the market perfectly is challenging, understanding broader market trends can help in making a more informed decision. For example, entering the market just before an anticipated interest rate decrease could maximize affordability.

Conducting Thorough Market Research

  • Local Market Analysis: Deep dive into the local real estate market’s health, looking at historical price data, rental yields, and future development plans.
  • Demographic and Economic Factors: Research demographic trends and economic conditions that could influence future demand, such as population growth or employment rates in your area of interest.

Financial Planning and Strategy

  • Financial Affordability Analysis: Conduct a thorough assessment of your financial situation, considering not only the purchase price but also ongoing costs such as maintenance, property taxes, and insurance.
  • Mortgage Pre-approval: Securing mortgage pre-approval can give you a clear idea of your borrowing capacity and put you in a stronger position when making an offer on a property.
  • Emergency Fund: Ensure you have an adequate emergency fund to cover unforeseen expenses or changes in your financial situation without having to immediately sell the property at a potential loss.


The Australian property market, standing at the crossroads of robust demand and challenging economic conditions, presents a mixed bag of opportunities and cautions for potential buyers. On the one hand, government initiatives like the ‘Help to Buy’ program aim to improve market accessibility, offering a glimmer of hope for first-time buyers and underscoring the market’s potential for growth. On the other hand, economic pressures such as potential interest rate hikes and high living costs necessitate a cautious approach, emphasizing the need for thorough market research and sound financial planning.

For prospective buyers, local market trends, economic indicators, and government policies should be thoroughly evaluated. It’s about balancing the desire for investment or homeownership with the practicalities of affordability and market timing. The advice leans towards urging buyers to stay informed, consider diversification, and prepare for the long term, recognizing that while the market holds promise, it is not without its risks.

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Gemma Kim
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