Housing affordability has been in the limelight so far this year, with serviceability tests still a notable obstacle for many buyers to leap.

The cash rate set by the Reserve Bank of Australia – a major influence on interest rates – remains at a 12-year high, and banks must demand borrowers be able to afford their repayments if rates were to climb another 3%. 

Meanwhile, Australia’s median capital city house price reached a record high of close to $1.1 million at the end of last year. 

“Strained affordability – which sits at its worst level in at least 30 years – is likely weighing on home prices,” PropTrack senior economist Angus Moore said.

“Nonetheless, we expect prices in 2024 will still grow, albeit at a slower pace than in 2023.”

Let’s dive into some of the key housing trends epitomising the property market this year so far.

Housing supply shortage to continue

There has been an increase in property sales in recent times, with 115,000 dwellings swapping hands in the three months ended January, CoreLogic estimates.

That’s a near-12% increase on the same period of the year prior.

However, Australia’s housing shortage likely won’t abate any time soon.

Building approvals remain low while population growth continues to be strong, Mr Moore notes. 

“Housing demand has been buoyed by high migration, but also tight rental markets that have probably incentivised renters to transition towards home ownership if they can afford to do so,” CoreLogic research director Tim Lawless said.

The majority of buyers still want to purchase a house, rather than a unit, despite a clear price gap between the two property types.

“It seems that most Australians are willing to pay a higher premium than ever for a detached home,” Mr Lawless said, commenting on the 11% lift recorded in capital city house prices since 2022’s trough.

That’s compared to a 6.9% uptick in unit values over the same period.

CoreLogic figures reveal a 30% divergence between the median Australian house price and the median Australian Unit price.

House price growth to continue, but slower

Speaking of prices, they’re expected to continue on an upward trajectory. 

Though, that trajectory is expected to be more level than the one we saw in 2023. 

Domain expects Australian house prices to rise 5% to 7% this year, while unit prices are tipped to rise 2% to 4%. 

Sydney houses are forecast to lead the way, rising 7% to 9%, while units in the harbourside city are tipped to climb 3% to 5%. 

Brisbane and Adelaide are also forecast to be leaders, with house prices expected to jump 7% to 8%.

Slower growth is expected in Melbourne and Hobart houses (up 2% to 4%), as well as in regional areas. 

Interest rates to remain stable, but a cut could drive prices higher

However, the slight uptick in property prices predicted in 2024 could be supercharged in the event of a rate cut, according to experts.

Rate cuts towards the end of the year could provide a “spark” that bolsters prices, Domain chief of research Nicola Powell recently told the Savings Tip Jar podcast. 

Interest rates are the only weapon the RBA has against inflation – a major driver of the current cost of living crisis. 

The central bank aims to keep inflation in the realm of 2% to 3%, and it's a realm that seems more achievable now than it did a year ago. 

The latest Australian Bureau of Statistics (ABS) inflation data saw the cash-eating phenomenon ease from its recent peaks, having risen just 4.1% over the year to the December quarter. 

Chances are, if it continues on its downward trajectory, the RBA might cut the cash rate before reaching its inflation target. 

CommBank forecasts the cash rate will experience its first cut in September 2024 while Westpac predicts Australia will see as many as two cuts this year.

NAB and ANZ, meanwhile, both tip the first cut to come in November, which would see the cash rate maintain its peak for a total of 12 months.

Rental crisis could ease 

Finally, more first-home buyers are expected to climb into the housing market in a bid to escape the rental crisis. 

Those living alone who can’t buy might be tempted to shift to a sharehouse, thereby freeing up more rental stock.

That could ease the pressure on renters, who have been battling rising rents and low vacancies. 

InfoChoice’s recent Rent Crisis Survey found seven in ten renters are spending more than 30% of their income on housing and four in ten have had their rent increase by more than 10% over the last 12 months.

For landlords, an easing of the rental crisis might mean a fall in demand for properties and an adjustment to a slower pace of rent growth.

Image by Tom Rumble via Unsplash