Melbourne home prices could fall in 2024, taking $65,000 off a typical property | Housing Boom and Bust Report

Some property experts are suggesting the city’s home prices could fall next year depending on inflation, population growth, unemployment and conflict in the Middle East.

Some experts predict that home prices could fall in Melbourne next year, according to new SQM research.

Melbourne home prices could fall nearly $65,000 next year amid fears of a 14th interest rate hike shattering a housing recovery that has barely begun.

New insights from SQM Research in Christopher’s Housing Boom and Bust Report estimated home prices could fall as much as 7 per cent, or potentially rise 3 per cent in 2024, depending on inflation, the conflict in Middle East, population growth and a potential unemployment rise.

This means prices could drop by around $65,000, or may rise as much as $28,000 — based on PropTrack’s Melbourne median home price of $924,000.

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If there is a rise in the population more than 500,000 people however, this could lead to a more modest price drop.

SQM Research managing director Louis Christopher said mortgage holders had responded to interest rate rises by cutting their spending to meet their loan commitments.

“Where are they cutting (costs)? Well in discretionary spending. Discretionary spending (or) retail spending is a big part of our economy,” Mr Christopher said.

“(They’re) cutting out the restaurants in the evening, cutting out the holidays. Home borrowers have been stretched to the max.”

SQM managing director Louis Christopher.

Despite signs retail has already slowed down following 13 interest rate hikes since last year, the property pundit warned any further increase in inflation could drive the cash rate above 5 per cent.

It is currently 4.35 per cent, which has led to an average standard variable home rate of 6.72 per cent according to comparison website Finder.

Mr Christopher said combined with a slowdown in the rate of construction, this was enough to affect the housing market next year.

However, Ray White chief economist Nerida Conisbee said with unemployment at a 50-year low, mortgage holders weren’t particularly concerned about losing their jobs. And if they did, they weren’t concerned about finding another.

Ms Conisbee there wasn’t much pointing to price falls next year.

“It is providing a high level of certainty for people and is allowing them to hold out a lot longer than they otherwise would if they lost their job,” Ms Conisbee said.

“If we do see a big rise in unemployment, that will be problematic for mortgage holders who lose their jobs because at that point, it becomes really difficult to pay off their loan.”

Ms Conisbee said if you were looking to “make a quick buck” in this cycle, that wasn’t going to happen because prices weren’t rising like they did during the pandemic.

“The reality is it’s better to hold on and just to wait regardless; we know how prices have moved over the past decade in Melbourne and Sydney that they have gone up a lot,” she said.

“At the moment, population growth is continuing, we’re still seeing a shortage of new homes being built, so it doesn’t really point to price falls.”

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