State of the Nation | July 2024

A NATIONAL VIEW

Market showing signs of cooling price growth

The first half of the 2024 calendar year has delivered annualised national price growth of 8%, almost the same rate of 8.1% achieved for 2023. The big difference this year is the prime growth drivers are the smaller capital cities of Perth, Adelaide and Brisbane, with annualised growth of 25%, 20% and 15% respectively. By contrast Sydney and Melbourne are underperformers with rises of 5.6% and negative 2% respectively.

Never before have we seen such a diversified set of state price performances and it’s important not to draw local conclusions on national data - which is so often the headline that attracts media attention.

The most recent data shows signs of a cooling in national price growth as economic conditions begin to slow. This combined with listings growing 7.8% over the five year average is likely to see a reduction in the rate of price growth for the balance of the 2024 calendar year.

In an encouraging trend, we’re seeing increases in rental prices reduce slightly in the past quarter. This is an encouraging sign for the rental market and it’s likely the result of the beginning of a migration toward first home ownership for renters who see more sense in buying due to the relative escalation in rents compared to a mortgage. Compounding this is an increase in investment properties coming to market as investors both capitalise on 

strong price appreciation and also the increasing holding costs which have largely risen due to the rise in interest rates. It’s an interesting transition from the rental pool toward first home ownership.

The trend out of investment properties will further reduce the rental supply pool, leading to a continued situation of rental crisis across the nation. Recent data also shows the Federal Government target of 1.2 million new homes over the next five years is unlikely to be achieved, exacerbating the housing crisis and ensuring a floor under slowly increasing home prices in the short to medium term.

Despite the suggestion of global interest rate reductions, Australian inflation especially services inflation remains well above the target rate and whilst there remains a distinct chance the next rate move will be up, the likelihood regardless of the decision is for higher rates for longer. Having said this, some rate relief at this stage appears possible later in the 2025 calendar year.

Overall were entering a period of steadily increased supply in listings with reduced price volatility, excluding Perth and Adelaide and therefore an environment where Australians can feel comfortable in transacting without being exposed to sudden price movements.