Australian Residential Property Market Report – 2024
The Australian residential property market in 2024 faced a mix of challenges and stabilisation after the pandemic-induced volatility. Key issues, such as high interest rates, affordability, and supply constraints, shaped market conditions and will influence the outlook for 2025.
Key Issues Affecting the Market in 2024
Interest Rates and Inflation
In 2024, the Reserve Bank of Australia (RBA) maintained high interest rates to combat inflation, significantly impacting housing affordability. The high cost of borrowing made it difficult for many buyers to enter the market, contributing to reduced transaction volumes and downward pressure on prices, particularly in expensive capital cities.
Housing Affordability Crisis
Affordability remained a major concern, with many Australians unable to buy homes in major cities. Although price growth slowed compared to the boom years, the lack of affordable housing stock and rising demand for rentals drove up prices in both the sales and rental markets.
Supply Chain and Labour Shortages
The construction sector struggled with supply chain disruptions and labour shortages, delaying housing projects, especially in high-density sectors. This continued to limit the availability of new homes, exacerbating the housing shortage.
Population Growth and Migration
Australia’s population grew sharply in 2024 due to an influx of skilled migrants and international students, placing further pressure on an undersupplied housing market. While regional areas saw increased demand, major cities continued to experience rising prices and rents.
Government Intervention
The government introduced measures, including the First Home Guarantee and shared equity schemes, to assist first-time buyers. However, these efforts had limited impact on affordability, and significant progress in housing supply remained slow.
Market Outlook for 2025
Modest Price Growth
Interest rates are expected to stay high in 2025, keeping price growth modest. While regional areas might see some price increases due to higher demand, major cities will likely see stable or slow price movements due to limited purchasing power and ongoing borrowing costs.
Tight Rental Market
Rental demand will remain high, particularly in cities like Sydney, Melbourne, and Brisbane, where vacancy rates are low. The ongoing shortage of rental properties and high demand from prospective buyers turning to rent will push rents higher.
Further Government Support
Additional government measures are expected in 2025 to address affordability, including expanded first-homebuyer support and more affordable housing initiatives. However, these interventions will take time to impact the broader market.
Regional Markets and Migration
The trend of migration to regional areas is likely to continue in 2025, with affordable housing in high demand outside major cities. This shift may further strain regional housing markets, driving up prices in these areas.
Sustainability and Green Building
Sustainability will continue to be a growing consideration in the market, with increasing demand for energy-efficient homes and sustainable construction practices. Developers are expected to incorporate more environmentally friendly features into new projects.
Conclusion
In 2024, the Australian residential property market was marked by high interest rates, affordability challenges, and supply constraints. The outlook for 2025 suggests modest price growth, continued pressure on the rental sector, and ongoing government efforts to address affordability. Regional markets will remain strong, while sustainable housing will influence future development, with limited short-term recovery expected in major cities.