Where are property prices most likely to go in 2024, and why?

In a few major cities and rural areas, the residential market is still poised for large rent hikes and capital growth.

Right now, the mood of the market is best characterised as unsure. While people's expectations of long-term growth compete with the effects of rising interest rates over the past months, price trends have been inconsistent across the nation.

Leading the way are Sydney and Brisbane in the larger capital cities, while Perth and Adelaide have seen growth over the past 12 months. The smaller capitals, Hobart, Darwin, and Canberra are struggling a little bit as Melbourne is beginning to emerge from its rut.

There are signs of life elsewhere, as we discuss in this article, but only South Australia and Queensland have recently performed well in regional centres.

Beginning in March of 2023, pessimistic commentators on real estate were caught off guard by a sudden increase in price growth.

Up until the RBA's last two rate increases, this optimism grew from Sydney to other cities.

How then can we predict what to expect in 2024? Reviewing the variables we already know will be present and making predictions about how they will behave is the best place to start.

The first variable is the so-called "mortgage cliff," whereby borrowers have already been or will soon be transferred from low fixed rates of about 2% to variable rates ranging from 5.6% to 6.20%.

The residential market is still poised for significant rental growth despite political wrangling and grandstanding. Recently, some investors questioned regarding the possibility of market rents being impacted by the Albanese government's plan to construct 30,000 social housing units.

This plan will undoubtedly benefit those who will be housed, but it is unlikely to have any noticeable effects on rents.

In 2009, the Rudd Administration pursued a comparable housing initiative. 20,000 units were delivered, but it had little impact on rents or housing affordability.

According to the Australian Bureau of Statistics, rents have increased significantly over the past year, jumping from their 15-year average growth rate of 3.5 to 6.7%. In 2024, we predict that rental growth will reach double digits.

The crucial months to pay attention to for landlords are February and March. In most centres, around 30% of lease agreements expire during these two months, so that is when we will know how much the rent will increase.