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Australian real estate is set for a double downturn, according to a leading analyst, as interest rates finally weigh on house prices and sales announcements increase.
Key points:
SQM Research predicts stagnation or even decline in house prices in most cities, with the exception of Perth and Brisbane, in 2024.
High interest rates, rising unemployment and an increase in distressed sales are expected
PropTrack data shows that listings for sale jumped in October and are now much higher than last year in most cities and regions.
SQM Research managing director Louis Christopher made the prediction in his annual Housing Boom and Bust report, which forecasts the outlook for the year ahead.
While its “base case” forecasts that city average prices nationally will move in a range of -1 to +3 percent in 2024, it expects the gains to be concentrated in just two capitals .
“The cities of Perth and Brisbane are the only ones expected to see price increases, with each respective market driven by the tailwind of the recovering Chinese economy, which is expected to see strong demand for commodities such as iron ore,” Mr. Christopher wrote.
Louis Christopher, managing director of SQM Research, writes an annual forecast on the evolution of property prices for next year.(ABC News: John Gunn)
“However, for much of the rest of Australia, the sharp deterioration in housing affordability, driven by the continued rise in interest rates which are now (in SQM’s view) at restrictive levels, as well as an expected slowdown in the economy, will result in a modest to moderate correction in house prices taking place in Sydney, Melbourne, Canberra and Hobart.
“Adelaide and Darwin are expected to remain stable or record a minor increase/correction.”
Mr Christopher’s base case scenario is based on a Reserve Bank cash rate of between 4.1 and 5 per cent (currently it is 4.35 per cent), with population growth slowing to 460,000 or less (this year it is on track for around 600,000) and unemployment rising to 4.5. 5.5 percent.
Its worst-case scenario is based on a continuing energy crisis that sees inflation stay high for longer, interest rates rise above 5 percent and unemployment rise above 6 percent.
This would see house prices fall nationally by up to 3 per cent, with falls of up to 10 per cent in Canberra, 9 per cent in Hobart, 7 per cent in Melbourne and 6 per cent in Sydney , although Perth is expected to grow by the same 5 to 9 per cent under any economic scenario, with Brisbane also likely to weather any storm.
The news for tenants is expected to remain bleak, with SQM forecasting a further rent increase of 7 to 10 per cent on average next year, with an even steeper rise of 12 to 15 per cent in Perth.
Mr Christopher said another strong year of population growth and a decline in new house building would support prices, despite other factors tending to push them down, such as rising unemployment and forced sales.
“Interest rate increases in 2022, 2023 and perhaps 2024 will finally start to hurt homeowners and potential buyers,” Christopher warned.
“Distressed sale activity is expected to increase, particularly in NSW, where we are already starting to see a further upward trend in this data set.”
Real estate listings jumped in October
Separate monthly data from REA-owned PropTrack highlights some of the trends SQM predicts will drive prices higher in 2024.
It shows an increase in new listings for sale on realestate.com.au last month across all capital cities.
This is not unusual at the height of the spring selling season, but the 32.4 per cent rise in listings in Canberra and 30.8 per cent in Melbourne was unusually large.
Adelaide (+23.4 percent), Perth (+20.3 percent), Hobart (+17.8 percent), Sydney (+16.9 percent) and Brisbane (+13.7 percent) had all double-digit monthly registrations. increase.
But it is over the past year that the different trajectories of different capital city markets have become apparent.
New listings increased by 32.5 per cent in Sydney over the past year, 31.7 per cent in Melbourne and 24.5 per cent in Canberra.
Adelaide (+9.9 per cent), Hobart (+7 per cent) and Brisbane (+3.4 per cent) recorded smaller annual increases in new listings for sale, while Darwin was stable and Perth recorded a 7.3 percent drop in enrollment.
Angus Moore, senior economist at PropTrack, said for-sale listings are not unusually high, but more typical after a few years of very low sales activity.
“Sydney and Melbourne had a much busier October than last year, which partly reflects how quiet spring 2022 has been,” he noted.
“Activity is now comparable to what has been typical in mid-spring over the past decade.
“October’s listings figures reflect improving sales conditions, greater certainty around interest rates and the fact that prices have increased in much of the country this year. These factors have supported consumer confidence. sellers.”
Areas outside the capital cities have also seen an increase in sales activity, with new listings in regional areas up 9.4 percent last month and 11.1 percent year-on-year. former.
Including older listings remaining in the market, regional Victoria (+40.7%), regional Tasmania (+34%), Canberra (+23.6%), Hobart (+22.6%) and regional New South Wales (+22.3%). ) experienced the largest increases in homes available for purchase over the past 12 months.
However, the number of regional properties listed for sale nationally remains 31% below pre-pandemic levels.
Property price falls tipped for 2024 as interest rates weigh: Housing Boom and Bust Report