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‘Absolute game changer’: Five property predictions for 2024

‘Absolute game changer’: Five property predictions for 2024

It’s been a challenging year for the property market with rising interest rates, soaring house prices, a lack of supply and an increase in demand.

As for the new year, Domain’s 2024 Outlook Report predicts a further increase in house and unit prices, interest rates remaining at a high level and a strong population growth.

“We anticipate continued growth in house and unit prices, with some buyers, sellers and renters proactively adapting to the lingering impact of the 2023 market and potential changes in 2024,” Dr Nicola Powell, Domain’s Chief of Research and Economics says.

Here are Domain’s five predictions for the property market in 2024.

An interest rate cut will spark demand 

Affordability issues and lower borrowing power will continue to place a ceiling on buyers’ ability to purchase a home.

However, the outlook could be improved for buyers with a cut in interest rates or an easing of the mortgage serviceability buffer.

The Reserve Bank of Australia hit borrowers with a Melbourne Cup Day interest rate rise, lifting the nation’s cash rate target by 25 basis points to 4.35 per cent. After four months of stability at 4.10 per cent, the central bank chose to lift the cash rate to 4.35 per cent in a bid to tackle persistent inflation.

Set by the Australian Prudential Regulation Authority, the buffer is currently at three percentage points and is a safeguard to ensure homeowners can afford their mortgage payments should interest rates rise.

READ MORE: Australia’s ‘life changing’ 2 per cent property deposit scheme is a step closer

‘Absolute game changer’: Five property predictions for 2024
Affordability issues and lower borrowing power will continue to place a ceiling on buyers’ ability to purchase a home. (iStock)

The easing of the buffer could increase borrowing capacity and demand.

“We could see this buffer being reduced to 2.5 percentage points,” Dr Powell tells Nine.

“Whether we see an interest rate cut or the buffer reduced, what that will do for anyone looking to purchase, it will give them greater power in terms of borrowing capacity and feed into a better consumer sentiment.”

The flight to affordability

Some buyers may consider so-called bridesmaid suburbs – a second choice – as they chase affordability.

“In expensive cities like Sydney, we are seeing people looking further afield or having to choose a unit over a house,” Dr Powell says. “Suburbs and identities change so buyers will be thinking about what a suburb could become.”

Alongside a rise in generational inheritance, Domain also predicts the Federal Government’s Help to Buy shared equity scheme to be a “game changer” should it come into place in 2024.

The scheme will help 40,000 Aussies in purchasing a property with as little as a 2 per cent deposit. The government will take a 30 per cent equity stake in existing homes and 40 per cent in new homes. Applicants need to earn less than $90,000 a year for individuals or $120,000 as a couple.

READ MORE: The rise of luxury apartments in Gosford on the NSW central coast

A general view of housing in Sydney, Australia
Some buyers may consider bridesmaid suburbs as they pursue affordability. (Photo by Brook Mitchell / Getty Images)

”It ​​will be an absolute game changer for some first home buyers, allowing people to gain access to the market,” Dr Powell tells Nine.

“The flight to affordability will be even stronger if it comes into play next year. You’re going to see an increase in demand for first home buyers for similar-priced properties that are affordable.”

YIMBYs will replace NIMBYs

Domain predicts a year of progressive housing and national planning reforms, with the “not in my backyard” attitude changing to “yes in my backyard”.

Dr Powell explains that we not only need urban sprawl but also urban densification. This could involve a single block of land offering two dwellings or three terrace houses.

“Local governments have so much power and there’s a lot of ‘NIMBY’ that stops development occurring. We are starting to see tweaks occurring in some states.”

new trend amid cost of living crisis domain
A strong population growth will continue to impact the market. (Adobe Stock)

Population-driven housing demand 

Although Domain predicts net overseas migration to have peaked, strong population growth looks set to remain. Normal patterns are expected to return by 2025.

Strong population growth will continue to impact the market, particularly when it comes to overseas students and available rentals.

With a challenging rental market, some may consider buying a more attractive option.

Rental markets reach a tipping point

We are seeing more and more Aussies renting for longer and this looks likely to continue in 2024.

Domain anticipates a tipping point will be reached and rental price growth will be slow, most likely towards the latter half of the year.

“We’ve still got a very tight rental market,” Dr Powell states. “However, if we see more policies for first-home buyers, it will ease demand and create the transition of tenants becoming buyers.”