Australia’s Housing Shortage & Property Prices for 2024

You might have noticed how conversations about Australia's housing market dominate dinner table discussions, fuel media headlines, and stir up social media debates. The term 'perfect storm' has been thrown around to describe the spiralling property prices. But what does this really mean for you?

As we delve into the intricacies of Australia's housing landscape in 2024, we'll unravel the forces at play that are shaping the market. From the grip of housing approvals and completions to the less visible, yet potent, impact of population growth and immigration, every element plays a key role in the narrative of a market under pressure, hinting at why property prices are not just holding firm but are on an upward trajectory.

The Current State of Housing in Australia

Let's start by painting the picture of the housing scene in Australia today. You're likely aware of the headlines screaming about the housing crisis, but what do the numbers say? Over the past few years, housing approvals have become a critical barometer for understanding market trends. Approval numbers for new houses and apartments provide a glimpse into future construction activity, and right now, they tell a story of constraint and caution.

The figures are stark. Comparing today's data with the previous decade, there's a noticeable downturn in the number of housing approvals. For instance, while the mid-2010s saw a boom with numbers soaring to unprecedented highs, recent years have witnessed a steep decline. Various factors contribute to this trend, including regulatory changes, economic uncertainties, and the cost of construction. This decline in approvals is significant because it directly correlates with the number of new homes entering the market, thereby influencing supply and, ultimately, prices.

To understand the gravity, consider the construction completion rates. There's always a lag between the approval of new housing projects and their completion. This lag time, compounded by the decrease in approvals, has led to a shortfall in new homes just when Australia's population is growing at a brisk pace. The situation is akin to inviting more guests to a party without increasing the number of chairs; the result is inevitable discomfort.

Population Growth and Demand for Housing

You've probably felt the effects of population growth in everyday life, from busier roads to longer queues at your favourite cafe. But how does this translate to the housing market, and what does this mean for property investors? Simply put, more people mean greater demand for homes. Australia's population growth has been robust, driven by both natural increase and immigration, leading to heightened demand for residential real estate.

The numbers are telling. Over the past decade, Australia has experienced significant population growth, with projections indicating a steady rise in the coming years. This growth fuels the demand for housing, both to purchase and rent, pushing prices upward. The dynamic is straightforward: as more people move to or are born in Australia, the more homes are needed to accommodate them.

Moreover, the pattern of this growth plays a crucial role. Population increases are not uniformly spread across the country; urban centres, especially capital cities, bear the brunt. These areas, already grappling with limited housing stock, face additional pressure as the population balloons. For those who are looking to buy or rent in these hotspots, they're competing with an ever-increasing pool of potential homeowners and tenants, all vying for a piece of the real estate pie. For property investors looking at opportunities in the markets, this also means that great options that meet our investment criteria do not last long.

The Immigration Factor

Immigration is a significant driver of population growth and, by extension, housing demand in Australia. Historical data underscore the correlation between immigration levels and housing market dynamics. During periods of high immigration, the demand for housing escalates, often outpacing supply, and leading to price increases.

Currently, Australia is witnessing a resurgence in immigration following the lull of the pandemic years. The government's immigration policies are facilitating the entry of skilled workers, students, and families, contributing to population growth. This influx is expected to continue, if not accelerate, in 2024, further straining the already tight housing market.

Immigrants, like all residents, require accommodation, contributing to the surge in demand for rental and purchase markets. This demand is particularly pronounced in major cities and regional hubs where immigrants predominantly settle, exacerbating the competition for housing. The result? Spiralling prices and a market that favours sellers and landlords.

For those who are looking to realise the dream of homeownership or finding an affordable rental, this scenario becomes more challenging. The competition is fierce, and with more people entering the country, the scramble for housing intensifies. This scenario is not just a temporary blip but a sustained trend that could shape the market dynamics in 2024 and beyond. For property investors, this could create significant opportunities for those willing to act, and act quickly as the right option is identified.

The Supply-Demand Imbalance

Let's delve deeper into the heart of the issue: the imbalance between supply and demand. You've seen how the numbers don't lie; housing approvals are down, while population growth and immigration are on the rise. This mismatch is the crux of the housing shortage. But why is the supply of new housing lagging behind?

Firstly, there are the challenges faced by the construction industry, including rising costs for materials and labour, regulatory hurdles, and financing issues. These factors slow down the pace at which new homes can be built and ultimately contribute to the supply shortage. Additionally, there's the matter of land availability and zoning restrictions, particularly in urban areas where the demand is highest. These constraints make it difficult to increase the housing stock to meet the growing demand.

This means that finding a new home, whether to rent or buy, is becoming increasingly difficult and competitive. The scarcity of available properties can in some cases lead to bidding wars and rising prices, which is why it's so important to run your numbers and ensure that you're paying the right price for the right asset. In this environment, being prepared and acting swiftly can make all the difference.

Economic Implications

The housing shortage doesn't just affect individuals looking for a place to live; it has broader economic implications. As property prices rise, so does the cost of living, affecting overall affordability and economic well-being. For renters, this means allocating a larger portion of income to housing, leaving less for other expenses. For potential homebuyers, it translates into larger down payments and more substantial mortgages, impacting long-term financial planning and stability.

Moreover, the housing market's state influences consumer spending, investment decisions, and policy making. High property prices can lead to increased wealth for homeowners, boosting consumer confidence and spending. However, this benefit is not universally felt; for those struggling to enter the market, it represents a growing divide.

The rental market is also significantly affected. With more people vying for fewer available properties, rent prices are pushed up, impacting affordability and leading to potential increases in rental stress among lower-income households. This situation can have ripple effects across the economy, influencing labour mobility, spending patterns, and even social stability.

Future Outlook and Predictions

As we look ahead to 2024, what can we expect from Australia's housing market? The consensus among experts is that unless there is a significant increase in housing supply or a dramatic decrease in demand, property prices are likely to continue their upward trajectory. However, the market is also subject to external influences such as economic policies, interest rates, and global economic conditions, which can affect buyer and investor sentiment.

Predictions suggest that immigration will remain a key driver of housing demand, especially in major cities and regional centres experiencing population growth. This continued demand, coupled with the supply shortfall, is likely to keep property prices and rents high.

Yet, there's also a conversation around sustainability. How long can prices continue to rise before reaching a tipping point? The market may self-correct over time, with increased construction activity and potential policy interventions aimed at easing the housing shortage and improving affordability.

For prospective buyers, sellers, and investors, understanding these dynamics is crucial. While the market may seem daunting, opportunities exist for those who are well-informed and strategically positioned. It's about keeping a keen eye on market trends, being financially prepared, and sometimes, being patient for the right opportunity to arise.

What This Means for Buyers, Sellers, and Investors

As you navigate Australia's property market in 2024, understanding your position and strategy is paramount. For buyers, especially first-timers, the journey may seem daunting with rising prices and competitive markets. Yet, opportunities exist for those who are well-prepared and informed. It's crucial to have your finances in order, understand your borrowing capacity, and be ready to act swiftly when the right property comes along.

For sellers, the market conditions appear favourable, with high demand driving up property prices. However, timing and strategy are key. Knowing when to sell to maximise returns, understanding the local market trends, and presenting your property appealingly can make a significant difference in the outcomes you achieve.

Investors face a landscape of both opportunity and caution. While rental demand is high, leading to potentially attractive yields, the price of entry into the market is also elevated. Careful analysis of property types, locations, and long-term market trends will be essential to making successful investment decisions.

Conclusion

The narrative of Australia's housing market in 2024 is one of challenge and opportunity, shaped by a confluence of factors like supply constraints, population growth, and economic dynamics. For those looking to buy, sell, or invest, the market conditions demand careful consideration and strategic planning.

The perfect storm of high demand and low supply has set the stage for continued price growth, but the market is dynamic and subject to change. Staying informed, adaptable, and proactive will be key to navigating the complexities of the housing market in 2024. With the right approach, you can turn these challenges into opportunities, whether you're searching for a home or an investment.

Embark on your property investment journey with Ally Property Group, your trusted ally in Australia's real estate market. Our expert advisers are dedicated to crafting personalised investment strategies for Australian expats and residents alike, aiming to enhance your portfolio and maximise returns. Start building your wealth with Ally Property Group, where strategic insights, analysis and modelling leads to prosperous investments.

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General Information Warning: The information contained herein is of a general nature only and does not constitute in any way, personal advice. You should not act on any recommendation without considering your personal needs, circumstances, and objectives. We recommend you obtain professional property investment advice specific to your circumstances.