Which markets will hit new record highs in 2024?

According to Domain figures, the value of Australia’s housing market fell by 5 per cent across capital cities in 2022. The two biggest cities were at the forefront of the nationwide housing market decline, with Sydney dropping by -10.9 per cent and Melbourne down -5.9 per cent during the period.

Using a combination of a wide range of economic factors, property statistics and real-time behavioural data, the national property platform provided insights on what to expect for the financial year ahead.

Domain projects that house prices in Sydney, Adelaide, and Perth will soar to new record highs by the end of 2024, driven by anticipated 12-month price gains of 6 to 9 per cent, 2 to 5 per cent, and 1 to 3 per cent, respectively.

Notably, Adelaide and Perth house prices are predicted to rise slowly and may avoid a downturn completely — instead seeing a period of modest or sideways growth, for which Domain pointed out the South Australian capital is known.

During the same period, other cities are also projected to see gains in house prices, with Melbourne expected to experience growth of 0 to 2 per cent, Brisbane of 1 to 4 per cent, Hobart of 3 to 5 per cent, and Canberra of 2 to 4 per cent.

Overall, house prices across combined capital cities are projected to record annual growth of 2 to 4 per cent.

Meanwhile, the prices of units are projected to reach new record highs by the end of the upcoming financial year in Brisbane, Adelaide, and Hobart.

Apartments and townhouses in these cities are anticipated to experience gains of 0 to 1 per cent in the Queensland capital, 0 to 2 per cent in the South Australian capital, and 1 to 3 per cent in the Tasmanian capital.

The only other capital market expected to record unit price growth during the period is Perth (1 to 3 per cent).

Melbourne’s unit market is projected to experience a growth rate ranging from a decline of 2 per cent up to 1 per cent growth, while Canberra’s unit market is expected to see a decline of 1 per cent to 2 per cent growth.

Overall, unit prices across combined capitals are seen to record a 1 to 2 per cent growth in the upcoming financial year.

According to Dr Powell, population pressures will lead the charge in factors driving housing demand and property prices higher over the next 12 months.

“Australia has seen an exponential increase in temporary and permanent migration since the international border reopened in late 2021 to alleviate skills shortages. Of course, unlike natural population growth, those arriving from overseas aren’t already housed,” she explained.

This trend puts the market in a position where in the next financial year alone, nearly 130,000 extra dwellings will be needed, Dr Powell noted, with the eastern seaboard receiving the largest share of migrants.

“When you combine this with unprecedented headwinds in the construction industry and unseasonably weak listings, this has contributed to a forecast of continued tight housing supply that drives up market competition,” she stated.

But while prices are expected to rise, Dr Powell acknowledged affordability would contain the pace of growth.

“[Rapidly] rising interest rates and ongoing mortgage serviceability challenges [will] continue to play out in a complex and dynamic market,” she stated.

The report also provided insight into how the regional markets will perform in the upcoming year.

Following strong growth in regional areas during the pandemic due to strong demand for lifestyle locations and also thanks to the surge in sea and tree change movement, Domain forecasts regional Australia is set to see a “return to more traditional price patterns”, with a slower growth anticipated than the combined capital cities.

During the period, regional house prices are expected to outperform units by notching 1 to 3 per cent gains compared to the latter’s forecast growth rate of 0 to 2 per cent.

Regional NSW is projected to experience a growth rate ranging from a decline of 1 per cent up to 1 per cent growth, Regional Victoria expects gains of 1 to 4 per cent, and Regional Queensland is forecast to achieve growth of 3 to 4 per cent.

Moreover, house prices in Gold Coast and Sunshine Coast are estimated to see increases of 2 to 4 per cent and 1 to 2 per cent, respectively.

While regional unit markets are projected to experience relatively subdued growth compared to their house counterparts during the period, Domain’s forecasts indicate that all regional areas are expected to end the upcoming financial year on a positive note.

Forecast suggests that Regional NSW is likely to witness growth ranging from 1 to 3 per cent. Similarly, Regional Victoria is expected to experience gains in the range of 1 to 3 per cent, while Regional Queensland is projected to record more modest growth of up to 1 per cent. Furthermore, the Gold Coast and Sunshine Coast are estimated to see increases of 1 to 2 per cent and 1 to 3 per cent, respectively.

Domain noted that historically, migration policy had pushed migrants towards regional areas, with migrants willing to live in regional areas as they are awarded extra points and have an increased chance of getting a permanent visa.

But with the anticipated overhaul of the migration system, Domain argues the streamlined channels of overseas migration to regional locations may be overturned — helping to dissipate demand flows.

“That being said, with housing affordability remaining a significant barrier in our largest capital cities, demand will likely remain from younger home buyers who seek affordable regional markets, particularly those within close proximity to a major city or employment hub,” the report stated.

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