What’s In Store For 24? Melbourne Property Market Update
In This Week’s How's The Market | Edition 76
What’s In Store For 24? Melbourne Property Market Update
An Architectural Home That Actually Looks Like A Render
Agents Selling Houses On Christmas Day
What’s In Store For 24? Melbourne Property Market Update
It has been a tumultuous few years in the world of Melbourne real estate with a myriad of obstacles and opportunities overcoming the market.
From the pandemic and being the most locked-down city in the world, to soaring numbers of net overseas migration, then interest rate rises to the collapse of the building industry and a rental crisis.
So what could 2024 possibly bring to the table?
Here I’ll touch on the biggest factors that affect house prices and review what some of the major economists and banks are forecasting for the year.
At Tomii we believe there are 3 things that affect house prices: supply, demand & access to credit.
Let’s take a quick look at the state of each of these categories.
Supply
Building Industry
Insolvency in the Australian building sector was at an all-time high across the 2022 - 2023 financial year.
Though now with supply chain improvements and the stabilisation of material costs, the building industry is expected to begin to make a recovery.
Experts in the sector have warned that whilst the long-term outlook does look positive, the short term will still be rocky and we should expect to see more builders go under this calendar year due to outstanding commitments.
Government Changes
As you might recall in our article What You Need To Know About Victoria’s Housing Statement Sep 2023 Daniel Andrews made some serious changes to Victorias housing plan the week he left office.
There have been multiple major changes to planning policy to help increase supply including bringing in a task force to clear the backlog and rezoning major sectors to introduce more high-density living in some suburbs to turn them into smaller cities.
Plus the introduction of granny flats without planning permits to provide quicker relief for rental accommodation.
Demand
Net Overseas Migration & Population
One of the biggest factors affecting price growth in Australia and Melbourne in particular is our strong population growth fueled by net overseas migration. In the start of Victorias September Housing Policy was a statement that reads:
Melbourne is set to become Australia’s biggest city by the end of the decade, with the population estimated to grow by another 3.5 million people over the next 28 years. If we’re going to make sure the current problem doesn’t get worse, we need to build 1.6 million homes by 2051 – that’s around 57,000 homes a year. To ease the acute pressure people are currently facing, we need to deliver 2.24 million homes by 2051 – that’s around 80,000 a year.
In 1950, Melbourne's population was 1,331,966.
By 2050, Melbourne’s population is forecast to top 8 million people with 10 million across Victoria.
This is mostly due to migration as Melbourne has been ranked one of the world's most liveable cities multiple years in a row and we have a strong jobs market attracting highly skilled workers.
As everyone moving to Australia needs somewhere to live, this has a major impact on our rental market and property prices.
Rental Crisis
Vacancy rates in Melbourne have eased slightly over 2023 and are now sitting at 1.3% according to SQM data, however, many of the inner city markets are still sitting below 1% which is still at crisis levels.
Some regions are cooling off with vacancy rates increasing and asking rents slowing, however, it is still expected the overall market will experience further increases this year.
As many people are on fixed leases for one or more years, it can be expected that the pain of the rental increases will not have been felt by many and that many more people will be looking to purchase and get out of the rental market.
Auction Clearance Rates
Auction clearance rates dropped in the latter months of 2023 with November and December staying in the mid 40% after remaining steadily within the 50% clearance rate range from February to October last year.
This could be an indicator that the Melbourne Cup interest rate rise affected sentiment and more people's finances as a whole and that more people would prefer to use subject-to-finance clauses rather than being unconditional at an auction.
Access To Credit
Interest Rates
The major talk of last year, of course, was the interest rate rises and inflation that slowed the economy and reduced borrowing capacities immensely.
This put a major dampener on sentiment in the market as well as what people could afford.
Though most of the major banks and economists are forecasting interest rates to come down in the latter half of the year.
If these rates do come down, it will not only increase how much people can borrow and spend, but it will have a huge impact on sentiment and owner occupiers as well as investors will look to get in the market.
Major Predictions
What are the major banks predicting for 2024?
ANZ forecasts capital city property prices to lift 6 per cent. The biggest gain is tipped for Brisbane, 9 to 10 per cent, followed by Perth, 7-8 per cent. and Sydney, 6-7 per cent. Melbourne prices are predicted to lift 3 to 4 per cent.
CBA expects capital city prices to lift 5 per cent, with small variations across the cities. Brisbane is tipped for 6 per cent growth, Melbourne and Perth for 5 per cent, Sydney for 4 per cent and Adelaide for 1 per cent.
NAB predicts prices across the capitals to rise an average of 5.4 per cent. Prices are expected to lift 6.5 per cent in Brisbane, 6.2 per cent in Perth and Adelaide, 5.5 per cent in Melbourne and 5 per cent in Sydney. Hobart values are expected to end the year flat.
Westpac forecasts 6 per cent growth across the combined capitals. Perth is penciled in for the highest growth at 10 per cent, followed by Brisbane at 8 per cent, Sydney at 6, Adelaide at 4 and Melbourne at 3.
Domains chief economist Dr. Nicola Powell expects continued growth in house and unit prices into 2024 of between 5 per cent to 7 per cent, but warns of “an intricate dance of economic forces influencing the property price in Australia”. Upward price pressure could come from continued population growth and undersupply, counterbalanced by financial stressors facing buyers that could weaken demand.
Proptrack economists have forecasted national property prices to increase between 1 per cent to 4 per cent with Melbourne lagging behind as we have seen a landlord exodus with many investors putting their properties on the market due to state-based tax increases.
What The Agents Are Saying
“The most amount of properties our office has ever listed.”
Many agents have ended up working through the break - I was even speaking with a top agent yesterday who said they ended up working nearly full-time throughout the entire Christmas period, albeit they were able to do so from their beach house…
This is as many vendors who were on the fence about selling in 2023 have come out and said they are ready and no longer wish to wait.
Most of these listings are expected to come online and sell in the first quarter of this year which makes this first few months look like a great time to buy if you were planning to this year.
As Easter this year also falls on the last month of March, there is a tighter period for all of this stock to be sold.
The Wow Factor!
57A Canadian Bay Road, Mount Eliza, Vic 3930
It’s not often you see brand new architecturally designed homes that actually look like their render, however, this home looks straight out of a magazine.
Check out the bench top and view!
Price Guide: $5,900,000 - $6,300,000
In The Media
Multiple Melbourne homes sell on Christmas Day as agents turn Santa to deliver ultimate present
To echo the sentiment I have been hearing this week from agents over the break, check this article out!
Final Thoughts
2024 looks to be another rollercoaster of a year with decent price growth and a growing sentiment into 2024.
If you’re looking to buy, there may be a great opportunity in the first quarter of the year as stock increases and before interest rate drops increase competition.
Thanks for reading this far!
We value feedback and if you have any suggestions on what you would like covered in the future please email me at tristan@tomii.com.au
Happy Buying!
Note: This is general advice and does not take into consideration your objectives, situations or needs. Please consider if this advice is suitable for you and your circumstances and speak to a professional before making any financial decisions.
