2024 marked by “remarkably resilient” home price growth: AFR

There’s an old joke: What happens when you put ten economists in a room?

Answer: You’ll get 11 opinions.

Well, guess what?

That’s pretty much exactly what the Australian Financial Review (AFR) newspaper does every three or four months.

It asks a panel of ten economists or forecasters who specialise in property for their best guess about the direction of home prices.

And it often gets wildly differing opinions.

However, the latest assessment is overall, decidedly upbeat, with the AFR characterising the findings with the headline “Property price rebound is ‘remarkably resilient’”.

The findings

The majority of economists surveyed for AFR’s latest property panel are predicting property price growth of at least five per cent nationally this year, with only SQM Research’s Managing Director Louis Christopher even contemplating the possibility that there might be some kind of home price correction this year, with his gloomy -1.0 to 3.0% estimate.

It’s quite a turnaround from the Fin Review’s last survey in January, when the same analysts were predicting muted growth in property prices this year, with an average figure of only 3.1%.

One of Australia’s most high-profile economists, AMP’s Shane Oliver, was even predicting property prices would go backwards in 2024, between -5 and -3%.

In an astonishing about-face in just three months, he’s now tipping home prices will rise by 5% this year.

That change of heart has no doubt been inspired by what we have already seen in the first quarter of this year, with Core Logic’s respected national Home Value Index putting on 1.6%.

If demand continues at that pace, that means Australia is on track to record 6-6.5% home price growth this year.

“The endurance of the rebound is remarkable,” says the AFR’s Property Editor Nick Lenaghan, “amid receding hopes for interest rate relief this year as the Reserve Bank maintains the fight against sticky inflation with tight monetary policy.”

One of the panellists, Barrenjoey chief economist Jo Masters, says, “House prices have proven to be remarkably resilient in the face of a rapid and large tightening cycle.”

“Indeed, the long-held relationship between borrowing capacity and house prices has broken, as high interest rates have reduced borrowing capacity, but house prices have continued to rise,” she says.

This is a phenomenon that’s largely been driven by strong population growth, a shortage of housing, more people purchasing property in cash and younger home buyers increasingly getting loans or gifts from parents or other cashed-up family members—the so-called “Bank of Mum and Dad”—to help them get a foot on the property ladder.

Jo Masters says housing finance figures show the type of buyer in the market is shifting in favour of cashed-up borrowers, who were purchasing on relatively low loan-to-value and debt-to-income ratios.

PropTrack senior economist Eleanor Creagh agrees, telling the AFR that existing homeowners had benefited from years of strong price growth, accumulating equity in their homes.

“This has insulated them from the higher interest rate environment with many using equity gains to upgrade,” she says.

“Purchasing activity from these existing owners is one factor that has aided the resilience of home buying demand over the past year, despite affordability having significantly deteriorated.”

Where’s the growth?

All of the panellists in the AFR survey seem to agree that Perth will again be the standout performer this year, with predictions of price growth of up 16% in 2024.

“That resilience is especially apparent in Perth,” says the AFR’s Nick Lenaghan, “where strong migration, both foreign and interstate, coupled with a very affordable market, is fuelling the price gains.

“As in the other capital city markets, the limited supply of new and existing housing underpins that growth.”

It’s a similar story in Adelaide, with Knight Frank chief economist Ben Burston telling the AFR: “Prices in the fastest growing markets, Perth and Adelaide, remain well below other cities and look to have further upside in the near term.”

However, price gains are expected to be more subdued in the country’s two largest real estate markets.

Sydney is predicted to experience growth of between 4.5% and 9%, while Melbourne is tipped to only have muted price growth of between 0% and 4%.