Key takeaways
Property prices grew every month in 2024 despite high interest rates, but growth slowed in the latter half due to affordability issues and more homes hitting the market.
Strong net overseas migration and smaller household sizes continued to fuel housing demand. Resilient labour market conditions and wage growth supported buyer confidence.
Housing completions per capita remain historically low due to labour shortages and rising costs. Delayed or scaled-back projects from 2021-22 exacerbated the housing undersupply.
Dwelling approvals increased by 6.1% year-on-year in October, the highest in two years. Challenges like high build costs and supply chain delays remain, but government initiatives to fast-track projects are starting to show results.
Rental price growth slowed, and vacancies modestly improved as investor activity increased. Despite some easing, affordability remains a critical challenge for renters.
Increased investor activity added much-needed rental stock, though vacancy rates remain low. Affordability remains a concern, particularly in Sydney and Melbourne.
A spike in spring listings provided buyers with more options, cooling price growth slightly. Despite this, prices remain at record highs in many cities.
Year-to-date sales volumes in 2024 were 9.3% higher than in 2023, though activity slowed towards the year-end.
Inflation is trending down, but rate cuts are not expected until mid-2025. Lower interest rates in the latter half of 2025 could reignite buyer confidence and property price growth.
What a year it’s been for Australia’s property market!
While housing prices have kept climbing in most parts of the country, the pace has shifted gears.
Poor affordability, higher interest rates, and a surge in the number of homes for sale have all conspired to slow price growth.
Meanwhile, the rental market is showing signs of easing, but challenges remain.
Recently Eleanor Creagh, senior economist at Proptrack demonstrated how the property markets transformed this year in 10 charts, here is a summary of her thoughts.
1. Property prices: growth slows but resilience prevails
Property prices grew every month this year, defying the sustained higher interest rate environment, according to PropTrack's data.
However, growth slowed noticeably in the latter half of 2024, reflecting rising affordability pressures and an increase in stock for sale.
- Top Performers: Perth (+18.74%), Adelaide (+14.64%), and Brisbane (+12.56%) led the pack in annual growth.
- Underperformers: Melbourne struggled, with prices falling for seven of the past eight months and recording a 1.63% annual decline.
Interestingly, these shifts have reshuffled the rankings of Australia’s most expensive cities.
Melbourne, previously the second most expensive capital city, is now the fifth most expensive, recently overtaken by Brisbane, which climbed to second place behind Sydney.
2. Population growth fuels demand
Australia’s strong population growth remained a key driver of housing demand in 2024.
Net overseas migration, while slightly below 2023’s record highs, remained elevated, adding pressure to both buyer and rental markets.
Other factors bolstering housing demand include:
- Resilient labour market conditions.
- Wages growth supporting buyer confidence.
- Smaller household sizes, create increased demand for dwellings.
This population-driven demand has kept pressure on housing markets despite affordability challenges.
3. Supply constraints persist
According to Creagh, housing supply remains a critical issue, with completions per capita at historic lows.
Builders have struggled with rising costs and labour shortages, preventing the market from adequately responding to heightened demand.
The chronic housing undersupply has been a key factor supporting price growth, even as interest rates have risen.
Many projects initiated in 2021-22 were delayed or scaled back, further exacerbating the supply shortage.
4. Building approvals start to recover
After years of declining approvals, 2024 marked a turning point.
PropTrack reported ABS data showing total dwelling approvals rose 4.4% in October, reaching their highest level in two years.
Year-on-year, approvals were up 6.1%, signalling potential relief for the housing supply shortage.
However, challenges remain:
- High attrition rates between approval and completion.
- Persistently high build costs.
- Supply chain delays.
Even with these hurdles, the uptrend in approvals suggests a positive shift, aided by state and federal government initiatives to fast-track development and address bottlenecks in the approval-to-completion pipeline.
5. Rental market slightly eases
After years of relentless pressure, the rental market began to stabilise in 2024 according to Creagh:
- Rental price growth slowed, and vacancies improved modestly.
- Investor activity increased, leading to more rental listings.
- Also read:The 8 Best Property Investment Strategies in Australia
- Also read:Adelaide housing market update | December 2024
- Also read:Perth housing market update | December 2024
- Also read:Sydney housing market update | December 2024
- Also read:Latest property price forecasts for 2025 revealed. What’s ahead in our housing markets in the next year or two?
Still, affordability remains a major issue. While conditions have eased, they are far from balanced.
Many renters are still grappling with affordability challenges after significant rent hikes in recent years.
6. Investor Activity Drives Rental Supply
Investor activity picked up in 2024, contributing to a much-needed increase in rental stock.
According to Creagh, this uptick, combined with larger household sizes and slower net migration, helped stabilise rental markets.
However, she also noted that the overall rental vacancy rate remains low, and markets like Sydney and Melbourne continue to experience intense competition for affordable rentals.
The affordability crisis remains a significant concern, with many tenants paying a substantial portion of their income on rent according to Creagh.
7. For sale listings surge
Proptrack reported that spring brought a flurry of new listings, giving buyers more options.
This, combined with affordability constraints, has taken some heat out of the market.
The increased stock has shifted the balance of power slightly towards buyers in some markets, though prices remain at record highs in most capital cities.
8. Price growth slows but stays positive
After nearly two years of rapid growth, the pace of price increases has slowed, according to PropTrack's data.
For example, Sydney’s year-to-date price growth of 4.3% is almost half of the 8% growth seen during the same period last year.
Creagh explained that this moderation signals a more balanced market, though housing values remain resilient.
9. Sales volumes outpace 2023
Despite slowing momentum, buyers remained active for most of the year.
National sales volumes for 2024 were 9.3% higher year-to-date compared to 2023, according to PropTrack's data.
However, activity tapered off in November as affordability pressures and higher rates took a toll on buyer confidence.
10. Inflation and the interest rate outlook
Inflation continued its downward trend in 2024, but not enough to prompt rate cuts just yet.
The Reserve Bank of Australia (RBA) is expected to hold steady until at least May 2025.
Once rates start falling, we’ll likely see a renewed surge in buyer confidence, which could reignite price growth in the latter half of 2025.
What’s next for 2025?
Eleanor Creagh, Senior Economist at Proptrack said:
"Looking ahead, the property market is poised for a modest start to the new year.
However, the second half of 2025 could bring stronger growth as interest rates ease and confidence returns."
For now, it’s a great time for strategic investors to position themselves for the opportunities ahead, whether capitalising on softer growth in some cities or improving rental conditions.
