‘Markets will be fragmented’: Property expert’s warning as report reveals grim forecast for Aussie house prices

A new property market report has painted a grim picture for Aussie house prices in 2024, with one expert warning the market could be “fragmented”.

A housing expert has warned property markets could be “fragmented” next year amid a country-wide rebound of house prices, as a new report tips prices to rise up to 4 per cent alone.

PropTrack’s latest Property Market Outlook report, released on Thursday, found national property prices were likely to increase between one and four per cent after “resilient” growth in 2023.

Prices in Sydney are expected to grow between two and five per cent, albeit at a slower pace compared to this year.

PropTrack’s latest Property Market Outlook forecasted property prices to rise up to 4 per cent over the next year. Picture: NCA NewsWire / Nikki Short

“Perth (+5-8 per cent), Adelaide (+4-7 per cent), and Brisbane (+3-6 per cent) are likely to lead home price growth across the country after consistently recording strong gains in 2023,” the report states.

Michael Yardney, founder of Metropole Property Strategists, said Brisbane and Perth’s property markets were likely to outperform other markets while regional areas would underperform.

He said strong population growth at a time when not enough new dwellings were being built would drive prices higher.

“This extreme shortfall will exert upward pressure on house prices and rents throughout 2024,” Mr Yardney said.

“It is anticipated that interest rates will fall in the second half of 2024 and at some stage next year it is likely the Australian Prudential Regulation Authority (APRA) will relax its mortgage serviceability buffer.

“This is currently at three per cent and the combination of these factors will increase borrowing capacity.”

Mr Yardney said poor consumer sentiment, underpinned by economic uncertainty, held back property-buying decisions over 2023.

Michael Yardney, founder of Metropole Property Strategists, said Brisbane and Perth’s property markets were likely to outperform others over 2024. Picture: Supplied

The report follows 11 consecutive months of house price growth in Australia. Picture: NCA NewsWire / Nikki Short

“Until... confidence that interest rates have peaked and inflation is under control, it’s likely that consumer confidence will remain low in the first half of 2024,” he said.

In November, home prices rose to a record high of 5.5 per cent after 11 months of consecutive growth.Capital cities drove home price growth over the year, rising 6.6 per cent over the same period, compared to a 2.8 per cent increase in regional areas.

Cameron Kusher, PropTrack’s Director of Economic Research, said a combination of “continued strong demand” and limited new housing construction would likely cause prices to increase over 2024.

“Stage three tax cuts will commence in July, which will benefit higher income earners, and in turn, could lead to increased demand for higher priced housing,” he said.

“The volume of (housing) stock available for sale remained at persistently low levels while buyer demand also increased significantly, fuelled by a housing shortage and strong population growth.

“It’s likely these trends will continue into 2024.”

Asked about solutions to what actions need to be taken to stop disproportionate house prices increases, Mr Yardney said there was no easy solution.

“Our property markets are experiencing an unprecedented crisis related to a lack of supply at a time of significantly increasing demand from a burgeoning population,” he explained.

“While the federal government has brought about initiatives to build 1.2 million more homes over the next five years commencing in 2024, this is unrealistically high target at a time when it is not financially feasible to build new homes at affordable prices.

“Rather than spreading out to new suburbs, as was the style over the last decades, we are now going to have to densify our capital cities with more medium density developments.”