To Buy Or Not To Buy? Experts Are Not Sure

The Australian housing market is a vital part of the nation’s wealth. As of late 2023, the Australian Bureau of Statistics (ABS) valued the residential property market at $10.4 trillion.

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Market Recovery and Growth

After experiencing a downturn in 2022, the housing market rebounded in 2023. Despite multiple interest rate hikes that pushed the cash rate to a ten-year high of 4.35%, real estate values increased across the country.

Factors Influencing the Market

Experts attribute the market’s resilience to a limited supply of new homes and strong demand driven by population growth. These factors have helped shield the market from the negative effects of rising interest rates and high housing costs.

Predictions for 2024

Economists are divided on the real estate market’s outlook for 2024 due to uncertainty about whether the cash rate has peaked and when it might decline. Current predictions suggest national house prices will rise by 5% to 7% in 2024. Expected increases in median house prices include:

  • Sydney: 7% to 9%
  • Brisbane and Adelaide: 7% to 8%
  • Perth: 6% to 7%
  • Canberra: 3% to 5%
  • Melbourne and Hobart: 2% to 4%

Impact of Interest Rates

A potential reduction in interest rates could boost consumer confidence and housing demand. If rates decline in late 2024, housing activity is likely to increase.

Regional Insights

  • Victoria: Melbourne’s median house price fell by 1.5% in the first quarter of 2024 but remained relatively stable over the past year, with a slight increase of 0.7%.
  • National Trends: Prices in many rural areas of Victoria have dropped, reversing gains made during the COVID-19 pandemic.

Are Australian Houses Overpriced?

Australian house prices are considered high compared to average salaries. A survey by Demographia International found that Australia’s property market is among the most expensive in the world. Factors like population growth, economic conditions, and government incentives have all influenced prices.

Expert Opinions

Shane Oliver, chief economist at AMP, noted that housing prices are about 30% higher than what Australians can afford based on borrowing capacity. This highlights the affordability challenge for average income earners.

Key Drivers of Property Prices

Several factors influence property prices:

  • Affordability and Interest Rates: Despite high interest rates, property values have remained strong. Future rate cuts could improve affordability and drive prices higher.
  • Demand and Supply: Housing shortages and strong demand continue to push prices up.
  • Consumer Confidence: Financial security and employment prospects heavily influence housing decisions.
  • Economic Climate: Overall economic health, including GDP growth and employment rates, affects property values.
  • Population Growth: Increasing population drives housing demand, contributing to rising costs and rental shortages.
  • Credit Availability: Easier access to credit boosts housing demand.
  • Investor Sentiments: Positive investor sentiment can drive property prices up, while negative sentiment can cause price drops.
  • Government Incentives: Policies and incentives significantly impact market dynamics.

Long-Term Forecast (2025-2030)

Over the next decade, Australia’s population is expected to grow to 29 million, driving significant changes in the housing market. An increase in high-rise apartment buildings and medium-density dwellings is anticipated, particularly in Sydney and Melbourne. Well-located properties are expected to see an average annual growth rate of about 7%, potentially doubling in value over the next 7 to 10 years.

Investing with Nfinity Financials

Navigating the property market can be complex, but Nfinity Financials offers comprehensive services to help clients grow and protect their wealth:

  • Strategic Real Estate Guidance: Create a property plan that aligns with your family’s future.
  • Buyer’s Agency Services: Leverage our market expertise to find investment-quality properties or your dream home.
  • Wealth Advisory: Receive tailored financial planning and wealth management advice.
  • Property Management: Maximize your returns with stress-free property management services.
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