The Australian housing market has seen its fair share of ups and downs over the past few years. With the pandemic leading to surging demand in 2020-2021 and declining affordability due to rising interest rates in 2022-2023, it has been a rollercoaster for home buyers and investors.
This comprehensive guide analyses the latest housing market data and trends across Australian cities and regional areas. We’ve also included our Australian housing market predictions, as to where property prices could be heading in 2024 and beyond!
Booming Prices During the Pandemic (2020-2021)
The Covid-19 pandemic in early 2020 led to major shifts in Australia’s property market. With international borders closing and people spending more time at home, the demand for housing skyrocketed surprisingly. Record-low interest rates and government incentives like HomeBuilder grants further fueled this frenzy.
According to CoreLogic home value indexes, Sydney saw a peak annual growth of 28.6% in March 2021, while Melbourne witnessed a 21.3% yearly jump in the same month. Even smaller capital cities like Adelaide (18.4%) and Brisbane (18.2%) posted double-digit growth rates at their peak.
Several factors drove this unprecedented price growth across metro and regional Australian real estate:
- Work-from-home flexibility allows people to live further from CBDs
- Low inventory and huge buyer demand create bidding wars
- The wealth effect from stock market gains & excess savings increases purchasing power
- Investor FOMO with property perceived as a haven asset
The most sought-after property types that led to the price boom were houses, which saw much stronger demand growth than units, especially those on larger land plots. Coastal lifestyle markets were also immensely popular with city dwellers looking to relocate.
Overall, the Australian housing market went through a remarkable surge during 2020-2021, achieving the fastest annual growth rate since the late 1980s.
Moderating Growth and Rising Rates (2022 Onwards)
While the Australian property market remained red-hot for most of 2021, the winds started shifting towards the end of the year. As the economy reopened and life returned to normal, the frenzied buying activity cooled down, leading to more moderate growth.
Then, in 2022, the RBA began its rate hike cycle to tackle soaring inflation – taking the cash rate from an emergency low of 0.1% to a decade high of 3.1% within 7 months. This led to mortgage rates almost doubling from 2020 lows.
As per the latest CoreLogic Hedonic Home Value Index results, here were the annual growth rates in November 2022:
- Sydney property prices up by 2.1%
- Melbourne prices grew marginally by 0.2%
- Brisbane saw the fastest growth at 9.3%
- Perth values were up 6.9%
- Adelaide witnessed a 10.3% yearly rise
- Hobart prices declined 3.8% over the past year
The boom years were behind most cities, although Brisbane and Adelaide continued to see solid price increases. And the once unbeatable Hobart market recorded its first annual decline since 2019.
Among other factors, shrinking borrowing capacities and slackening investor activity were responsible for the broad housing market slowdown. As buyers held back, sales volumes and clearance rates dropped across most cities.
Surprisingly Resilient Growth in 2023
Given the record mortgage rate hikes in 2022, all eyes were on how the Australian property market would fare in 2023. Consensus expectations were that house prices would moderate or even fall in some cities.
But that hasn’t quite played out so far this year. As per the latest PropTrack Home Price Index, Australian property values have continued to show resilience – recording a 5.4% yearly rise nationally in November 2023.
In particular, capital city real estate has powered ahead with a 6.5% annual jump compared to just 2.6% growth in regional markets. Sydney (8.4%), Melbourne (6.6%), Adelaide (9.1%) and Perth (6.2%) have all seen solid price increases over the past year.
Brisbane has been the star performer again in 2023 – with its property market expanding by 12.4% annually. Strong interstate migration and infrastructure spending continue powering Queensland’s capital.
On the other hand, Canberra witnessed a meagre 1.4% growth over the last 12 months. After leading price declines in 2022, Hobart was again the worst-performing market in 2023 – with median values falling by 6.5% year-on-year.
While property analysts have marvelled at the continued price strength, some pockets are showing signs of slowing down. Outer suburban areas that boomed during Covid, like the NSW Central Coast and Queensland’s Gold Coast, have seen values shrinking recently.
Among factors that kept the housing market resilient so far in 2023 have been:
- Transactions are shifting more towards cash buyers
- Strong labour market and rising wages
- Persistent undersupply of listings
- Population growth outpacing new construction
So, there seems to be enough underlying demand by owner-occupiers, especially in the more affordable segments, to counterbalance the slide in investor activity. But will 2024 bring more heat to Australian real estate?
Forecasting the 2024 Housing Market Outlook
There are always risks when gazing into the property crystal ball. But based on current leading indicators, here is what we can expect in 2024:
Interest Rates While the RBA has signalled further hikes early next year, market consensus is that the cash rate could peak around 3.6% – before cuts resume in 2024. As inflation continues easing and the economy slows, RBA may need to support growth.
So mortgage rates could hover around their current levels for 2024 before declining mildly towards year-end. This should reprieve home buyers after 2 years of surging borrowing costs.
Supply-Demand Imbalance Australia’s chronic undersupply of dwellings, especially houses, is expected to continue next year. With population growth outpacing construction and more properties being held off-market, listings will remain tight.
This persistent shortage, especially in the largest cities like Sydney and Melbourne, means buyer competition will stay strong in the affordable segments. So well-located houses priced appropriately should still see decent demand.
Investor Activity Higher rents and positive rental yields will attract more investors back to the market in 2024. But their overall share of housing finance may not return to pre-2021 highs just yet.
With moderating mortgage rates, however, investment property buying is expected to gather some lost momentum next year. Rising rents will improve yields following the erosion of the last few years.
Price Forecasts Given the above trends, most experts predict property price changes to remain muted in 2024 – ranging between -5% to +5% across major markets. The era of double-digit growth is certainly over for now.
Markets with structural undersupply, like Sydney and Melbourne, could see mild growth if their economies stay resilient. Brisbane, Adelaide, and Perth may continue outpacing other capitals.
But expensive markets like Canberra and Hobart could witness further 5-10% declines until their affordability and rental yields regain balance.
Among houses, well-located family homes are expected to hold value better than units and off-plan apartments. Regional markets could track slightly behind capital cities depending on local economic factors.
So, while Australian housing may not boom like during COVID-19, a steady population rise means a prolonged crash remains unlikely. Targeted government policies around boosting new housing supply will also play a key role.
Most Affordable Suburbs in 2023
For Australians struggling with sky-high property prices, the big question is – which areas are still somewhat affordable to buy real estate in?
Here are some of the most budget-friendly suburbs within capital cities and regional areas:
Capital Cities
Sydney
- Blackett
- Ambarvale
- Airds
Melbourne
- Melton South
- Hillside
- Caroline Springs
Brisbane
- Kingston
- Woodridge
- Gailes
Adelaide
- Davoren Park
- Smithfield Plains
- Elizabeth Park
Perth
- Camillo
- Brookdale
- Kiara
Hobart
- Gagebrook
- Herdsmans Cove
- Chigwell
Darwin
- Moulden
- Wulagi
- Anula
Regional Areas
New South Wales
- Tenterfield
- Inverell
- Tingha
Victoria
- Robinvale
- Ouyen
- Sea Lake
Queensland
- Murgon
- Proserpine
- Normanton
Western Australia
- Port Hedland
- Newman
- Halls Creek
South Australia
- Port Pirie
- Port Augusta
- Whyalla Norrie
Tasmania
- Rosebery
- Queenstown
- George Town
While these affordable areas come with their locational tradeoffs, some regions also offer good lifestyle benefits like proximity to beaches and amenities. Savvy buyers can secure good deals, especially for houses, in these lower-priced markets.
Housing Market Predictions
To summarise, here are the key likely trends in Australia’s property market for 2024:
- Headline growth forecasts ranging -5% to +5% across major cities
- Mild house price increases in undersupplied markets like Sydney and Melbourne if their economies show resilience
- Brisbane, Adelaide, and Perth to continue outperforming other capital cities next year
- Canberra and Hobart could see further 5-10% price declines before recovering
- Well-located houses hold value better than units/apartments
- Investor activity expected to rise but unlikely to return to pre-2021 highs just yet
- Persistent listings shortage to keep buyer competition alive in affordable segments
- Moderate mortgage rate cuts possible towards the end of 2024
- Government policies around housing supply are crucial for keeping prices affordable
While 2023 surprised many with the resilience of Australian real estate, growth rates are settling at more sustainable levels. Property remains largely unaffordable for average income households, especially in the biggest cities.
But steadier conditions after the boom-bust swings during Covid should bring some stability. The market looks set for at least a few years of mid-single-digit price changes as supply-demand dynamics evolve.
