Posted on December 8th, 2023

Property Trends Set to Define 2024

As we look ahead to 2024, the Australian property market is set to undergo significant changes that will redefine the landscape for property investors. The decade-long rental boom shows no signs of slowing down, leading to both increased demand for rental properties as well as rising rental prices.

Surging demand will soon outpace current housing supply pipelines with capital cities at the forefront of this demand. This supply imbalance is a huge opportunity for investors looking to capitalise on the way 2024 is shaping up to be a key year in the Australian property market.

Why 2024 will be a defining year for the next decade

While change fatigue has been prevalent in recent years, a mental shift towards a more future-focussed mindset is starting to take hold.

The COVID-19 pandemic has certainly been a disruptive force, but population growth across the country is picking up, and demand for housing is projected to increase.

Predicted interest rate cuts coming in 2024/25 and a resulting rise in consumer confidence will also act as catalysts for growth within the market.

Now that the market recovery is in full swing, it’s time for investors to start planning ahead and positioning themselves for success in 2024.

Key trends for future-focused investors:

Immigration rates are at record highs
The construction of new property remains at decade lows
National vacancy rates are at a record low
Yields across the country are improving

These trends act as strong signals to investors that 2024 is the ideal time to enter the market or expand their property portfolio. The combination of population growth and limited housing supply will likely drive-up property values and rental prices, making it a prime opportunity to profit from capital gains and cash flow.

Interest rates and consumer confidence

According to the Reserve Bank of Australia’s November 2023 report, inflation is projected to decrease to 3.5% by the end of 2024 and fall below 3% by the end of 2025. As a result, household budgets are expected to improve, leading to increased consumer confidence and spending. The anticipated interest rate cuts in 2024 will also make borrowing more affordable, further stimulating the housing market.

Figures are accurate at time of publication. Source: RateCity, 22 Sept

Against this backdrop, the past 25 years have witnessed substantial growth in apartment values, a 300% increase, along with a 125% rise in construction costs and an impressive +600% surge in land values. It’s reasonable to assume that this trend will continue in 2024, as the demand for apartments remains high due to their affordability and low maintenance costs. For investors, investing in apartments in 2024 is a smart bet, as demand and value are projected to remain strong.

As always, the location of a property is a crucial factor in determining its potential for capital growth and rental income. In 2024, it’s expected that prime locations such as the inner city and those in close proximity to universities will continue to be sought after by both investors and tenants alike. With limited land availability in these areas, prices are likely to remain high but provide strong returns on investment.

The rental property market

One cost of living factor that shows no signs of abating is increasing rent prices. CBRE predicts an increase of 30% or higher in rental prices for apartments to 2029 will create a lucrative opportunity for property investors. As more people turn to renting due to affordability constraints in the housing market, rental demand will continue to rise. This is especially true for apartments, which offer lower rent prices compared to houses in many areas.

Investors looking to maximise their profits should consider investing in areas with high rental demand and desirable features such as proximity to public transportation and amenities. Investors should also take note of changing demographics and lifestyle preferences when choosing a property to invest in. Millennials, who make up a large portion of renters, prioritise location and access to amenities over property size. Therefore, apartments in well-connected areas with communal facilities such as gyms and pools are likely to attract high demand from this demographic.

Surging housing demand

One of the biggest trends set to define 2024 is the surge in housing demand. With Australia’s population increasing, housing supply is struggling to keep up.

Immigration is expected to play a significant role in Australia’s population growth, contributing to two-thirds of the increase from 26.5 million in 2023 to 30.4 million by 2033. As new people arrive, the demand for housing will rise, particularly in major cities. This will put further pressure on an already limited supply of housing, driving up prices and making rental properties even more attractive for investors.

It is also noteworthy that the average annual income is also expected to rise. By 2033, the average annual income is projected to increase from the current $96,000 to $132,000 per annum. This growth in income reflects the positive trajectory of the economy.

In the job market, there is a projected growth in employment opportunities, especially in the health and technology sectors. Whereas 1.1 million workers were added from March 2020 to August 2023, 2.6 million workers are expected to be added by 2033. This triple boost of population, income growth, and job market expansion will have a huge impact on the Australian economy leading to increased housing demand in 2024 and the years beyond.

Boosting housing supply

The lack of new property being built over the past 5 years has led to a significant shortage in housing supply. This shortage has been further exacerbated by the effects of the COVID-19 pandemic, as the costs and time required to build new homes have increased. The supply of rental properties has also been affected by investors selling up during the pandemic, leading to a decrease in rental stock.

Given these circumstances, fast-tracking housing supply becomes a top priority to meet the growing demand and address the housing shortage.

To address this issue, the Australian government has implemented various initiatives to boost housing supply. These include streamlining planning and development processes, providing incentives for property developers, and investing in affordable housing projects.

A $10 billion Housing Australia Future Fund (HAFF) has been approved by parliament, clearing the way for the construction of new social and affordable homes. The plan entails building 30,000 new structures over five years, yet there is no specific timeline for construction commencement.

It’s clear that private investors will have a crucial role to play in addressing Australia’s housing shortfall.

KPMG forecasts property prices to surge in FY25

Conclusion

With Australia’s capital cities are back on the path to growth – Big Cities are Back!

With the “Covid Exodus” to the regions well and truly over, population growth in Australia is now expected to be centred around the capital cities.

As a result, quality rental properties will be in high demand with forecasts suggesting that by 2026, almost 80% of precincts will have a vacancy rate below 1.5%.

While Sydney, Melbourne, and Brisbane will continue to lead the way in terms of population growth and demand for housing, smaller capital cities like Perth and Adelaide are also expected to see an increase in demand.

Choosing the right location is only half the battle. Investors must select their property developers carefully too. Those with a track record of delivering quality homes on time and within budget are likely to be the most successful. Otherwise, the cost of delays and defects can quickly erode profits.

It looks like 2024 will be the year when Australia’s housing market starts to boom. This means now is the time for investors to carefully consider their options and select properties primed for growth. With such favourable conditions in place, it’s an exciting time for those looking to create wealth through real estate!

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