Property prices tipped to fall but millions of Aussies to cop cost-of-living blow

A sharp drop in housing affordability, plus a slower economy, are expected to drive prices down across the country’s biggest cities.

Australia's top property markets are expected to fall in 2024 as the Reserve Bank’s (RBA) aggressive interest rate hikes hit homeowners and would-be buyers, but there's a far more grim warning for a third of Australians who rent.

Nationally, it’ll be a bit of a mixed bag for the housing market, according to SQM Research managing director Louis Christopher. Sydney and Melbourne property prices are expected to fall by as much as 4 per cent, while those in Perth and Brisbane might find it harder to buy with prices predicted to go up.

With interest rates on mortgages rising, a drop in property value could be devastating for borrowers who are copping extra fees for less equity in their house, fuelling stressed out owners being forced to offload their properties. Aussie renters are also expected to suffer further, with the Housing Boom and Bust Report agreeing with the RBA that rent prices are only going up.

Property market
A leading analyst has tipped Australia’s major property markets will drop next year, but there won't be any relief for renters. (Source: Getty)

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Why and where are property prices going down?

Christopher's “base case forecast” is for average national dwelling prices to change by between -1 and 3 per cent.

He expects price drops will be limited to Sydney (-4 to 0 per cent), Melbourne (-3 to +1 per cent), Canberra (-8 to -4 per cent) and Hobart (-7 to -3 per cent).

This is due to a "sharp deterioration of housing affordability" which has been driven by the RBA's interest rate hikes, plus an anticipated slower economy.

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Sharp interest rate increases throughout 2022 and 2023, and possibly 2024, are expected to squeeze mortgage owners as well as those hoping to buy, with the cash rate increasing from a record low of 0.10 per to 4.35 per cent since May last year.

“Distressed selling activity [by homeowners under financial pressure] is expected to jump, especially in NSW where we are already starting to see a new trend upwards in that data set,” Christopher said.

Why have some markets resisted?

Perth and Brisbane are the only cities expected to record price rises, driven by a recovering Chinese economy boosting demand for commodities like iron ore.

Perth prices are expected to rise by 5 to 9 per cent, while Brisbane prices are forecast to go by 4 to 8 per cent in 2024.

Adelaide prices are expected to stay flat, with a forecast of 0 to 3 per cent.

What is the outlook for the rental market?

But there’s a warning for around 31 per cent of the population who are renters, with Christopher forecasting asking prices will rise by 7-10 per cent across the nation.

The national median asking rent is now $601 per week, rising to $694 per week for the capital cities. Asking prices are up 9.2 per cent, year on year, across the country, and 15.2 per cent for the capitals.

While SQM expects an easing in population growth, it also is predicting a sharp decline in dwelling completions over 2024. This ongoing imbalance between demand and supply will continue to “put upward pressure” on rents.

What will this mean for property prices?

Based off the current average price of a property in each capital city, we calculated the maximum that property prices could either drop or increase.

  • Sydney: Drop of up to $44,848

  • Melbourne: Drop of up to $23,356

  • Brisbane: Rise of up to $61,646

  • Adelaide: Rise of up to $21,000

  • Perth: Rise of up to $56,807

  • Hobart: Drop of up to $46,352

  • Darwin: Drop of up to $14,919

  • Canberra: Drop of up to $67,418

This base case is based on the RBA keeping the cash rate between 4.1 and 5 per cent, population growth slowing to 460,000 or less, and unemployment rising to between 4.5 and 5.5 per cent.

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