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.

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.

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

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