Supply-demand dynamics will continue to exert pressure on property prices. Australia's population continues to grow, yet new residential supply falls short of meeting demand. This pronounced supply-demand imbalance is expected to exert upward pressure on property prices and rents in 2024. While some government and developers have taken measures to increase housing supply, the impact will take time to materialize.
The trend in interest rates will significantly impact the real estate market. Interest rates are expected to decrease in the latter half of 2024, and the Australian Prudential Regulation Authority (APRA) may ease mortgage repayment ability buffers. This means increased borrowing capacity, enticing more homebuyers into the market. However, changes in interest rates are a complex factor influenced by various elements, including inflation and economic growth.
The recovery of consumer confidence is pivotal for real estate market development. Poor consumer confidence in 2023 constrained homebuying decisions. However, as buyers realize that the price decline seen in 2022 has been compensated, and prices have rebounded to or exceeded previous levels, the fear of missing out among buyers will gradually spread. Additionally, over time, consumer confidence in economic growth and interest rate trends is expected to recover, further propelling the real estate market's development.
It is noteworthy that the real estate market in 2024 still faces some potential challenges. Firstly, affordability issues may restrict the homebuying plans of certain families. Despite rising property prices, many families still aspire to progress with their homebuying journey, especially first-time homebuying families. In such cases, they may opt for properties that align with their economic circumstances, such as townhouses or apartments, or consider moving to more budget-friendly suburbs.
Secondly, financial uncertainty and concerns about job security may deter some homebuyers from making significant decisions, such as purchasing or investing in real estate. The Reserve Bank of Australia (RBA) aims to help slow inflation by increasing the unemployment rate, which could have some impact on consumer confidence.
Lastly, the recovery of consumer confidence requires more time. Although concerns about interest rate hikes have eased somewhat, consumer confidence still remains at deeply pessimistic levels. This is primarily due to ongoing cost of living and high-interest rate issues continuing to impact economic confidence. Over time, with economic stability and inflation control, consumer confidence is expected to gradually recover.
